Abstract
This paper investigates the timing of the impact of changes in checks and balances on macroeconomic efficiency in a panel of countries. Using Battese and Coelli's one‐stage approach, we find that increasing checks and balances results in greater efficiency. Furthermore, the impact of institutional changes on efficiency is delayed, with a full effect showing after five to six years. This finding remains robust after distinguishing developed and developing countries, including country‐fixed effects and using alternative functional forms of the production frontier and alternative measures of checks and balances. The relation is also robust to controlling for endogeneity.
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