A Nexus among Institutions, Education and Economic Growth: An Analysis of Developing Countries

Abstract

This study investigates linkages among institutions, education and economic growth empirically and theoretically and is based on panel data between 1996 and 2017. For the panel data, two-stage least squares (2SLS) regression analysis was used to estimate the results in developing countries. Rule of law, control of corruption, absence of violence and political stability were used as proxies for institution. We found that economic growth exerted positive and significant effects on education, control of corruption, absence of violence and political stability. Rule of law, absence of violence, political stability and control of corruption have positive and significant effects on education, and education has a negative and significant effect on absence of violence and political stability but a positive and significant effect on rule of law and economic growth. Hence, results show that institutions positively affect economic growth through education and a difference in institutional quality is the key to differences in education among countries.