Abstract
The paper investigates the impact of institutional quality on economic growth by taking 48 countries in Asia between 2005 and 2018. By using the quantile regression methods with panel data, institutional quality is found to be a key factor of economic development. However, in the lower-income Asian countries, the institution with better quality appears to promote the growth more effectively than in the higher-income ones. Moreover, the paper also finds out a nonlinear relationship between institutions and economic growth. The results show that there is an institutional threshold for economic growth to reach its highest level. If the institution indicator exceeds the threshold, it causes the reverse effect on the growth. Moreover, the economic growth of Asian countries is also affected by inflation (INF), labor force (LABO), trade openness (OPEN), and infrastructure (TELE). From that, the study suggests some policy implications for Asian countries and Vietnam, in particular, in order to improve institutions contributing to economic growth.
Highlights
Economic growth is understood as an increase in the output of an economy in a certain period (Dung & Phuong, 2009)
The quantile regression method is applied for further analysis of the institutional impacts on economic growth at the different distribution of quantiles
The results show that expectation of economic growth is influenced by institutions via five different measurable variables of the CPIA indicator set
Summary
Economic growth is understood as an increase in the output (or income) of an economy in a certain period (Dung & Phuong, 2009). Marakbi and Turcu (2016), Ndjokou and Tsopmo (2017), and Ouoba and Sawadogo (2019) studied the role of institutions and concluded that there exists a threshold of institutions affecting economic growth while Chong (2020) found a non-linear relationship between institutional quality and economic growth. Tion on the economic growth of 128 developed and the institutionally related topic is quite developing countries in the period of 1984-2012 new in Vietnam and none of the complete studwith a smooth transition table regression (PSTR) ies on institutions uses the quantile regression model and revealed that a non-linear relationship method. The quan- The study further tests the non-linear relationtile regression is the more suitable method to ship between institutions and economic growth explore the different impacts of institutions on by adding squared institutional variables to the economic growth relating to several quantiles model and using panel data regression methods. (10) As summarized in Table 2, the effect of variable INS on economic growth has significant meaning at most of the quantiles, except for the quantile 0.5, which coefficient INS is not statistically significant
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