Effect Of Institutional Quality Research Articles

Effect of institutional quality and foreign direct investment on economic growth and environmental quality: evidence from African countries

This study applies the method of the fully modified ordinary least squares (FMOLS) method and the vector error correction model (VECM) to explore whether institutional quality (IQ) and foreign direct investment (FDI) promoted economic growth (EG) and environmental quality (EQ) in oil-producing and non-oil-producing African countries from 1999 to 2017. The FMOLS findings demonstrate that IQ significantly promoted EG and improved EQ in the non-oil-producing countries, however it only improved EQ and showed no significant impact on EG in oil-producing countries. FDI significantly promoted EG to a higher extent in oil-producing countries than in non-oil-producing countries, but it presented no significant impact on EQ in both groups. The VECM results reveal that (i) two-way causation among IQ and EG, IQ and EQ, FDI and EG, and FDI and EQ was occurred in both groups, in the long-run. (ii) two-way causation among FDI and EQ and one-way causation from FDI to EG was observed in non-oil-producing countries in the short-run. Moreover, two-way causation among IQ and EG, and one-way causation from IQ to EQ were observed in non-oil-producing countries. To realize the sustainable development of economy and environment, a series of policy suggestions have been discussed.

The Nonlinear Impact of Institutional Quality on International Reserves: International Evidence

This paper investigates the nonlinear effect of institutional quality on the holding of international reserves by applying the two-step system generalized method of moments on data consisting of 67 countries from 1996 to 2016. The hypothesis is that the association between institutional quality and international reserves has an inverted U pattern. The coefficient sign of the institutional quality and its square term supports the hypothesis. Besides, the marginal effects suggest that the higher the institutional quality index, the lower the demand for reserves. The outputs indicate the importance of good institutional quality in reducing the overdependence on international reserves.

Boosting economic growth through energy in Africa: the role of Chinese investment and institutional quality

ABSTRACT In 2019, Chinese investment rose to $110 billion across all sectors in Africa. However, there are many criticisms that the Chinese presence is a curse to the development of Africa. Hence, we direct our attention to unravel the truth about these allegations by examining the underlying effect of institutional quality and Chinese investment in Africa on energy consumption (EC) and its impact on economic growth. We applied a panel corrected standard error (PCSE) econometric procedure for a selected 21 sub-Saharan African countries. Our results show that energy consumption promotes economic growth. Similarly, the study revealed that the institutional quality and Chinese investment in Africa were the underlying factors for the positive effect of energy consumption and economic growth. Therefore, our results expand the economic growth literature and inform policymakers of the need to pay attention to bilateral trade and investment with China.

Determinants of Sustainable Open Innovations—A Firm-Level Capacity Analysis

Institutional constraints impede firms’ open innovation. They have been a challenge, obstructing growth and sustainable development. Research on open innovation has shown that the quality of institutions essentially affects innovation in firms. Hence, prior research has made efforts to incorporate the quality of institutions into open innovation analysis. We can use a series of analyses to examine the impact of corruption, the tax system, and other indicators on firm innovation performance. However, developing economies, such as countries in sub-Saharan Africa, represent a specific group of countries that have long been perceived as those mostly deficient in the rule of law, with poor regulatory quality and a great deal of corruption. In these countries, it is also possible to see a lower number of studies, as the inability to obtain quality data to perform empirical analyses can often limit researchers. Nevertheless, employing data from the World Bank’s 2019 Enterprise Survey, this research aimed at exploring the determinants of sustainable open innovation as well as the effect of institutional quality on firms’ capacity utilization and process innovation through a PLS structural equation model analysis. Our research showed interesting findings, such as the fact that the quality of institutions significantly affects firms’ use of OI instruments and capacity utilization. This research also provides for the novelty of the analysis of capacity utilization in an open innovation analysis. The results support the hypotheses that low institutional quality negatively affects firms’ implementation of inbound open innovation instruments, and that there is a strong and positive effect of low institutional quality on firms’ capacity utilization. In addition, we confirm the premise that firms’ implementation of inbound open innovation instruments has a positive and significant influence on firms’ process innovation.

Impact of Institutional Quality on Bilateral Exports: Exploring the role of Development

This study uses the gravity model to analyze the homogeneous and heterogeneous effect of institutional quality and development on bilateral exports. We use the panel data of 61countries for the period 2000 to 2016 and employ the Poisson Pseudo Maximum Liklihood (PPML) econometric technique with a High-Dimensional fixed effect (HDFE) for an estimation that allows the analysis in the presence of high dimensional fixed effects. The findings reveal that the direct effect of institutional quality and level of development on bilateral exports is positive and significant. Further, the institutional quality and the level of development of the exporter country have more impact on bilateral exports than that of the importer country. Our estimation results of homogeneity of institutions show that when both trading countries share the same level of institutional quality, it boosts the bilateral exports. The major finding of this study reveals that the interaction effect of institutional quality and level of development on bilateral exports is positive and significant. High value of interaction term of exporter economy and low value of importer country suggest that interaction effect of institutional quality and level of development on bilateral exports of exporter country have a greater impact than the interaction effect of institutional quality and level of development of importer country due to having the more production and exports facilities in exporter country. Based on the findings, some essential policies are also recommended, followed by some future research gaps.

Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

We examine the linear and nonlinear long-run relationship between public expenditure and institutional quality, and income inequality in Asia and the Pacific. By applying panel cointegration methods using a dataset from 1988 to 2014, our main findings suggest that public expenditure and institutional quality have negative long-run, steady-state effects on income inequality in Asia and the Pacific. The effect of institutional quality has only a one-way Granger causality link to income inequality. The existence of a nonlinear relationship between public expenditure and institutional factors linked to income inequality is also found. It implies that, at the early stage of institutional development, a country whose economy has experienced higher public expenditure generates rising income inequality; then, in the long run, when the country improves its institutional quality, higher public expenditure results in lower income inequality.

시민참여가 분배적 정의에 미치는 영향에 관한 탐색적 연구 : 제도적 질의 조절효과를 중심으로

본 연구는 시민참여가 사회적 정의로서 분배적 정의에 어떠한 영향을 미치는지를 살펴보고, 이들의 관계에서 제도적 질로서 공정한 행정서비스 제공이 어떠한 조절효과를 나타내는지 알아보고자 한다. 분석결과, 첫째, 정치․사회 현안에 대해 블로그·트위터·페이스북·온라인 게시판 등에 의견제시, 불매운동 참여, 제도적 질은 복지혜택의 공정성과 경제·사회적 분배 구조의 공정성에 정(+)의 영향을 미쳤다. 그리고, 공무원, 정치인에게 민원·의견 전달은 복지혜택의 공정성에, 탄원서·진정서·청원서 등 제출은 경제·사회적 분배구조의 공정성에 정(+)의 영향을 미쳤다. 둘째, 상호작용항의 영향은 탄원서·진정서·청원서 등을 제출하고 제도적 질이 높으면 복지혜택의 공정성과 경제·사회적 분배구조의 공정성에 정(+)의 영향을 미쳤다. 이를 토대로 정책적 함의를 살펴보면 첫째, 공정한 행정서비스를 확인할 수 있도록 정보공개 청구를 활성화하는 것이 필요하다. 둘째, 정부부처들의 공정성 지표를 특화하여 신설하는 것이 필요하다. 셋째, 빅데이터 분석을 기반으로 공론화나 협치위원회의 구성이 필요하다. 넷째, 시민참여를 조직화하는 시민단체, 즉 비영리단체와 정부간 정기적인 소통이 필요하다.

Interaction Between FDI, Institutional Quality, Pandemic and Economic Growth Inthe Mena Region: Application On Dynamic Panel Data (GMM)

The objective of this work is to study the interaction between four different indicators namely FDI, institutional quality, pandemic and economic growth. In other words, this paper presents the effects of institutional quality in a pandemic context on the attraction of FDI to stimulate economic growth while showing the types of FDI that can be attracted during the period 2011-2020. The latter is characterized by two types of the pandemic namely the Ebola epidemic in Africa and the Covid-19 epidemic in Asia. Our empirical contribution is based on dynamic panel data (GMM) using the Arellano and Bond (1998) approach. The results found validate the hypothesis that institutional quality is the engine of economic growth. In addition, among the main results found when the interpretation has serious and clarifieted the implications for countries just below the threshold of institutional quality. Any reform in the area of democratic accountability, the quality of the bureaucracy, ethnic or military tensions in politics is likely to result in a gradual increase in the benefits of FDI, even for countries well below the threshold. However, due to institutional complementarities, reforms targeting specific characteristics of institutional quality may in fact bring other characteristics of their relevance closer together to show this work focused on institutional quality to attract FDI to stimulate growth in a context of the epidemic.

The Effect of Institutional Quality on Financial Inclusion in ASEAN Countries

The Effect of Institutional Quality on Financial Inclusion in ASEAN Countries

The Effect of Institutional Quality on Foreign Direct Investment

The Effect of Institutional Quality on Foreign Direct Investment

Natural Resources and Fiscal Policy in CEMAC: The Role of Institutional Quality

This article aims to analyze the effects of institutional quality through natural resource rents on the orientation of fiscal policy in the Central African Economic and Monetary Community (CEMAC). The methodology adopted for this purpose is based on panel data (over the 1996-2016 period) and the GMM system estimator. The results show that natural resource rents are a means by which institutional quality affects the orientation of fiscal policy. Indeed, economic and institutional governance complements natural resource rents in the countercyclical orientation of total public spending. Thus, there is an absence of the indirect effects of institutional quality on the orientation of total public revenue behavior. Similarly, during natural resource booms, the orientation of total public spending remains countercyclical. Thus, political and institutional governance reinforces the effects of natural resource booms on the countercyclical orientation of total public spending. With regard to the decline in natural resource rents, total public spending remains countercyclical. Only institutional governance reinforces the effects of the decline in natural resource rents on the countercyclical nature of total public spending. Thus, the procyclical orientation of the behavior of total public revenue remains, regardless of whether there are periods of boom or collapse in natural resource rents. Political governance amplifies the effects of the decline in natural resource rents on the procyclical behavior of total public revenue. These results lead to economic policy implications.

Moderation Effects of Institutional Quality, Diversity, Income inequality and Globalization on Social Cohesion: An Empirical evidence.

Social cohesion is both an end, as well as a mean, to achieve other economic and developmental goals. As an end, a more cohesive society can be thought of as a peaceful place to live in. As a mean, social cohesion has various economic and developmental implications. Therefore, nurturing social cohesion can be a desirable objective and knowing about different determinants of social cohesion can be helpful in this regard. Ethno-linguistic diversity and socioeconomic deprivations have been identified as such determinants in the existing literature. Well-functioning institutions can also be good predictors of social cohesion in a society. They can help to mitigate the negative effects of diversity on social cohesion. However, hardly any study has empirically investigated the moderating effects of institutions on social cohesion. The current study has tried to fill this gap. For this purpose, a cross country analysis has been done by employing the Least Squares Dummy Variables (LSDV) technique for empirical estimations. Institutional quality has been measured with the help of an index that has been constructed by taking into account the political, legal, and economic dimensions of institutional quality. The results suggest that diversity, income inequality, and globalization have negative whereas institutional quality has positive effects on social cohesion. The use of the interactive term of institutional quality with diversity, income inequality, and globalization reveals that institutional quality works to nullify the negative effects of diversity, income inequality, and globalization on social cohesion. .

Institutional Quality and Sukuk Development: A Study of Five OIC Countries

The objective of this study is to shed some light on the effect of institutional quality on the development of the global sukuk market. Specifically, this study examines the impacts of the institutional quality that adopts three dimensions of the Worldwide Governance Indicators (WGI), i.e., Rule of Law (RL), Regulatory Quality (RQ), and Government effectiveness (GE) on the global sukuk development of the top-five countries of sukuk issuance, i.e., Malaysia, Kingdom of Saudi Arabia, United Arab Emirates, Indonesia, and Bahrain. Drawing on a quantitative study with the data in the forms of global sukuk issuance from 2002 to 2017, panel-data regression (OLS) and General Method of Moment (GMM) were applied. This study showed that RL and GE have a significantly positive effect on sukuk issuance; however, RQ did not influence the development of the global sukuk market. These results imply that a country that is capable to maintain the institutional quality, especially in terms of rule of law and government effectiveness, will most likely be the country that can successfully develop the sukuk market. These results play a crucial role in filling a research gap among previous studies and provide an empirical evidence of the government’s role and its influence on the sukuk development.

Effect of institutional quality and renewable energy consumption on CO2 emissions-an empirical investigation for developing countries.

This paper investigates the role of institutional quality in moderating the impact of energy consumption on CO2 emission, with other variables such as trade, capital formation, FDI, financial development and population in 39 developing countries for 1995-2017. We use mean group (MG), augmented mean group (AMG), common correlated effects mean group (CCEMG) estimator, dynamic system GMM, panel grouped-mean FMOLS and panel quantile regression for the empirical results. From the different estimation techniques, we find that institutional quality moderates energy consumption and strengthens its effectiveness in abating carbon emissions. The combined influence of institutional quality and sector wise energy consumption on emissions is significant and negative. Our finding also confirms the Environmental Kuznets curve (EKC) hypothesis in the presence of institutional quality. Renewable energy consumption is also found to reduce emissions significantly in the long run. Given the importance of institutional quality and renewable energy in reducing CO2 emission, the policymakers need to improve the quality of institutions and deploy more renewable energy for final consumption to achieve long-term climate goals.

Combined Effects of Institutional Quality and Financial Development on Macroeconomic Performance in Sub-Saharan African Countries

Combined Effects of Institutional Quality and Financial Development on Macroeconomic Performance in Sub-Saharan African Countries

Long-term effects of institutional instability

We examine the contribution of de jure and de facto institutional instability to long-run growth and development for a large panel of countries in the period 1820–2016. To this end, we extract the latent components of de jure and de facto instability of political institutions from several existing datasets. We distinguish between two types of instability where the positive type is associated with adaptive efficiency, while the negative type promulgates insecurity of property rights and institutional weakening. The evidence suggests that greater de jure and de facto institutional instability has a strong negative impact on income and growth, where de facto instability appears to be relatively more important than de jure instability. The negative effects of institutional instability operate independently of the positive effects of institutional quality, which implies that even second-best institutions are able to sustain a high-level growth path and economic development if they manage to maintain a minimum level of stability. The negative effects of greater institutional instability are robust across a variety of specification checks, and do not seem to be driven by sample selection bias. Instrumental variable estimates provide results with strong identification properties and suggest that the effect of institutional instability on long-run growth and development appears to be causal. Our instrumental variable estimates show that a modest increase in de facto instability is associated with 26 percent lower per capita income in the long run.

What explains trade costs? Institutional quality and other determinants

AbstractThis paper investigates the impact of institutional quality on trade costs across 133 countries during 1995–2014. The results show that good institutional quality significantly reduces the three types of trade costs, that is, total trade costs, trade costs of agricultural goods, and trade costs of manufactured goods. Furthermore, the effect of institutional quality is significant in reducing trade costs with regard to the different trading country pairs, the different subperiods, the components of institutional quality, and the endogeneity issue. This paper contributes to the literature by confirming a significant and negative relationship between institutional quality and trade costs from a global perspective.

Institutional Change and Economic Growth in East Asia after the Asian Financial Crisis, 1997-98

Theories on institutional change assert that exogenous shocks are critical in transforming path-dependent institutions. There is not much empiric research, however, that has investigated whether that is indeed the case. To fill this gap, this study investigates the effects of institutional quality on economic growth with a focus on East Asia before and after the 1997-98 Asian financial crisis, which delivered a critical shock in economic activities and institutions in East Asia. Using panel data analysis from 1981 and 2007, I investigate whether the effect of institutional quality on economic growth differed in East Asia compared to rest of the world before the crisis and whether such relationship changed after the crisis. Using two-way fixed effects model, the estimation shows that the effect of institutional quality on economic growth was positive on average for the rest of the world after the crisis but negative for East Asia. The negative coefficient was particularly strong for the three countries—South Korea, Indonesia, and Thailand—that suffered the most during the crisis. However, in the long term, there was no significant change of this negative effect.

Does institutional quality affect the level of entrepreneurial success differently across the entrepreneurship distribution?

The phenomenon of entrepreneurship has driven much of the attention of academics, practitioners and policy makers. A correct and deep understanding of all the different conditions affecting entrepreneurship rates will advance in the establishment of useful measures that increase entrepreneurial success. The vast majority of the literature on the effect of institutional quality on entrepreneurship has been investigated based on average effects. However, how the impact of institutional quality on the level of entrepreneurship varies with the conditional distribution of entrepreneurship is still poorly understood. The present study attempts to fill the research gaps in this field. In order to examine the impact of institutional quality on entrepreneurship at different entrepreneurship levels, the fuzzy set qualitative comparative analysis approach is employed. Results show that entrepreneurial success is determined by the combination of the following conditions of institutional quality: voice accountability, political stability, regulatory quality and rule of law. Implications and future research directions are discussed. It would be interesting to analyze in future studies the motivation to become an entrepreneur, both theoretically and empirically, differentiating between opportunity and necessity entrepreneurship.

Patent intensity and concentration: The effect of institutional quality on MSA patent activity

AbstractPatented innovation is a predominately local phenomenon. It is also an indicator of economic growth. Using data on U.S. metropolitan statistical areas, we examine the long‐run effect of economic freedom, and each of its three components, on local patent activity. Using an instrumental variables approach for identification, we find that increased government spending is associated with reduced individual patent activity, though this effect is modest in magnitude. Our strongest results suggest that increased economic freedom significantly reduces patent concentration in both ownership and product types. This implies that economic freedom creates an environment conducive to diverse and diffused innovation and may provide a viable alternative to place‐based economic development strategies. Our results are robust to a quantile regression instrumental variable analysis.