Measures Of Institutional Quality Research Articles

The Institutional Quality Effect on Credits Provided by the Banks

Research on developing economies is deficient in analysing institutional quality dimensions that are beyond standard determinants of the provision of credits by banks. This study fills this gap by adopting a broad-based modelling approach in examining the effects of institutional quality on credit provided by banks for a large sample of developing economies. A structural model, including balanced annual panel data from the World Bank World Development Indicators and Worldwide Governance Indicators for the period 2004 to 2017, was estimated using panel-corrected standard errors and two-stage least squares estimation techniques. The core variables determining the credit provided by banks were controlled for in the estimation phase. The findings showed that the rule of law, regulatory quality and the strength of legal systems are significant determinants of credit provided by banks, among other factors. Investments in improving institutional quality can be beneficial for credit diffusion by the banks. This study is distinct from previous empirical studies of the developing economies as it directs attention to institutional quality measures on bank credit expansion in an inclusive modelling framework. It makes a significant positive contribution to the finance institutional nexus literature in terms of understanding the value and role that institutional quality plays in fostering bank credit provision in developing economies.

Natural resources and financial development: The role of institutional quality

This study investigates the natural resource rent and financial development nexus by subsuming the critical role of institutional quality in this paradigm in a sample of 87 Emerging and Developing Economies (EMDEs), during the period from 1984 to 2018. The findings demonstrate that natural resources rent undermines finance and supports the natural resource curse hypothesis in the financial sector of EMDEs. The institutional quality has a significant positive impact on finance and it positively moderates the resource-finance nexus. We argue that institutional quality follows some channels through which the natural resource curse operates and turns the resource curse into a blessing for the financial sector. Furthermore, the results document a threshold effect of institutional quality in the resource-finance relationship. Precisely, we find that natural resources rent positively explains finance, once a certain threshold level of institutional quality is attained – below which the natural resources rent becomes a curse, and hinders financial development. Therefore, policy attentions are recommended to promote finance by efficient utilization of natural resources through promoting and maintaining institutional quality beyond a certain threshold level, and incorporating its vital role. Our results are robust to the use of different samples, alternative specifications, and alternative measures of finance and institutional quality, and are practically useful to the policymakers concerned about EMDEs.

The joint impact of infrastructure and institutions on economic growth

AbstractThis paper examines the joint impact of infrastructure capital and institutional quality on economic growth using a large panel dataset covering 99 countries and spanning the years 1980–2015. The empirical strategy involves estimating a simple growth model where, in addition to standard controls, infrastructure, institutional quality, and their interaction are included as explanatory variables. Potential endogeneity concerns are addressed by employing generalized method of moments estimators that utilize internal instruments. We find that the interaction terms between infrastructure capital and institutional quality show a positive and significant impact on economic growth. These results are robust to a variety of alternative specifications and institutional quality measures. Hence, our results suggest that maximizing returns from infrastructure capital requires improving the quality of institutions.

Poverty in Sub-Saharan Africa: The Role of Business Regulations, Policies and Institutions

The study investigates the impact of business regulations, policies and institutions on welfare in Sub-Saharan Africa. The HDI and GDP per capita are used as measures of welfare or poverty. The World Bank doing business indicators are used as business regulatory measures and the Country Policy and Institutional Assessment are also used as policies and institutional quality measures. The study employs systems GMM estimation technique in examining these relationships. The results show improved welfare in SSA countries to be associated with less burdensome regulations on starting business. The results reveal that merely pursing regulations in respect of business operations and closure such as those related to getting electricity, protecting minority interest, paying taxes and resolving insolvency as a strategy to improve welfare directly does not work unless done within a milieu of sound policies and institutions. There are however threshold values at which policy and institutional quality indexes can complement regulations to improve welfare. Following a formal sample-splitting, the study finds some differences in these relationships explained by the income status as well as the legal origin of the countries. Policy implications are well discussed.

Institutional quality and foreign direct investment in Ghana

Purpose This paper aims to investigate the impact of institutional quality on foreign direct investment (FDI) in Ghana for the period 1985-2016. Design/methodology/approach The study uses the autoregressive distributed lag (ARDL) approach to examine the relationship between institutional quality along with other controlled variables and FDI. Findings Evidence from the ARDL framework establishes a positive significant effect of institutional quality on FDI irrespective of the time horizon. The results also reveal a significant impact of inflation on FDI in both short and long run, while GDP per capita growth and trade are significant determinants only in the short run. Practical implications The study recommends the instigation of effective policies and strategies that seek to strengthen the quality of institutions, as this provides a conducive investment climate to attract FDI. Specifically, policies that are focused on promoting transparent legal regimes, regulatory reforms, non-corrupt institutions and political stability should be the precedence of policymakers. Originality/value In addition to being a pioneering work on the impact of institutional quality on FDI in Ghana, the main contribution of the study lies in its application of the principal component analysis to generate a single measure of institutional quality based on a number of institutional factors.

COVID-19 and strategic communication with parents and guardians of college students

In the spring of 2020, the COVID-19 pandemic caused colleges and universities in the United States to transition from face-to-face to remote learning. Academic leaders need to understand how to better serve both their customers (parents) and their consumers (students) after this disruption in the academic business model. Strategic communication will be critical for rebuilding this industry sector. Taking a snapshot of communication patterns in the midst of change provides a baseline for future decision-making. This study builds on literature regarding emerging adulthood, family communication patterns, and crisis communication to examine two areas: (a) communication between parents/guardians and their students, and (b) communication between the institution and parents/guardians. In a study of 525 parents/family members, communication patterns reflect differences in stages of progression through the developmental stage of emerging adulthood. Digital communication tools dominated family communication and video calling increased. Parents/guardians of students who plan to return to their former institution were most satisfied with crisis communication, communication across the student life cycle, and measures of institutional quality. Parents/guardians of those who graduated were least satisfied on most measures. The potential for future philanthropy was relatively high across the sample. Recommendations are provided for applying insights to other strategic communication contexts.

Minimising the inflationary impact of fiscal deficits in Africa: The role of monetary, financial and political institutions

AbstractThis is an examination of the relationship between fiscal deficits and inflation in Africa based on the premise that the characteristics of monetary, financial and political institutions, do impact the nature of this relationship. The study hypothesizes that, the inflationary effect of fiscal deficits is minimised when the central bank is independent (CBI) and the financial market is developed enough to contain inflationary expectations. This impact is much more effective given stronger political institutions. Using a panel data spanning 1970–2012 for 48 African countries, we use a Two Stage System Generalised Methods of Moments estimator, with Windmeijer (2005) corrected SE and collapsed instruments to address the issue of instrument proliferation. We also use various measures of central bank independence, financial development and political institutional quality. Fiscal deficits are inflationary in Africa. The positive effect of fiscal deficits on inflation is weakened when the degrees of Central Bank Independence (CBI) and financial development are higher. Financial development minimises the modulating impact of lower CBI on inflationary fiscal deficits. While stronger political institutions minimise the dampening effect of high central bank turnover on inflationary fiscal deficits, it enhances the positive impact of stronger central bank independence and financial development on minimising inflationary fiscal deficits. The results are robust to varying measures of CBI, financial development, and political institutions. Africa's financial sector should therefore be developed alongside strengthening the independence of central banks and ensuring that the quality of political institutions are enhanced in order to effectively curtail inflationary fiscal deficits.

Immigration, Economic Freedom, and Ideology

Concerns about immigration and its impact on the institutions of the countries that welcome immigrants are not new. In the United States, we find such concerns in the correspondences and writings of Benjamin Franklin, Thomas Jefferson, and Alexander Hamilton. Recently, in response to a literature questioning efficiency of current immigration restrictions, Borjas (2015) speculates that immigrants coming from countries with poor institutions could reduce substantially the institutional quality in the United States to a point where it could negate all economic gains associated with immigration in terms of GDP and income. In this paper, we review the results of our research attempting to measure the impact of immigrants on the American states’ institutions. We use Fraser Institute’s Economic Freedom of North America index and the NOMINATE measure of state government ideology and citizen ideology developed by Berry et al. (2010) as proxies for the quality of the economic institutions of the US states. Our results don’t confirm Borjas’s concerns. Most relationships, positive or negative, between foreign born and the measures of institutional quality we used are neither statistically significant nor economically significant.

Choosing transfer institutions: examining the decisions of Texas community college students transferring to four-year institutions

ABSTRACTAs more students begin their higher education trajectory in community colleges in the US, there are few studies investigating the choice process for community college transfer students. This study draws on models of college choice to examine community college student transfer decisions. Using longitudinal administrative data, we examine institutional characteristics associated with students’ decisions about enrollment. We find that most transfers were to a relatively small subset of public, research institutions, despite a large and diverse set of options. Our results also indicate notable student subgroup preferences associated with measures of institutional support and quality for schools in student choice sets.

The Quality of Legal Systems and Property Rights by State: A Ranking and Their Implications for Economic Freedom

This paper constructs a new measure of the quality of the legal system and property rights by U.S. state, combining five pieces of data to develop a novel measure of institutional quality. It integrates this measure to the Economic Freedom of North America index to give a more complete subnational comparison of United States institutions. The quality of the legal system and property rights are measured to be strongest in the upper Midwest and northern New England, and weakest in the South and Hawaii. The integration of this data into Economic Freedom of North America has considerable implications for our understanding of economic freedom at the regional level.

Does Institutional Quality Matter for Infrastructure Provision? A Non-parametric Analysis for Italian Municipalities

This study explores the relationship between different dimensions of regional institutional quality and the efficient provision of transport infrastructure. A two-stage semi-parametric approach is applied to a large sample of public works procured by about 1700 Italian municipalities in the 2000–2014 period. First, we estimate the performance in contract execution; then, we test the impact of different measures and dimensions of institutional quality at both regional and provincial level. The results provide evidence that the quality of institutional environment matters in infrastructure procurement, though some specific dimensions of institutional quality appear to be more relevant than others in affecting performance in contract execution. Overall, the estimates are robust to alternative measures of institutional quality, alternative model specifications, and different sample selections.

Foreign direct investment and institutional quality: empirical evidence from South America

Purpose The purpose of this paper is to investigate the effect of institutional quality on foreign direct investment (FDI) flows in South America. Design/methodology/approach The study uses two-stage least squares (2SLS) and fixed effect ordinary least squares regression analyses to examine the relationship between institutional quality and FDI in South America. Findings The study finds a significant positive relationship between institutional quality index and FDI. This implies that improvements in the institutional quality relate to increases in the flow of FDI to South America. Domestic capital, GDP per capita growth, and trade positively relate to FDI. However, the coefficient of trade is not significant. This implies that increases in these variables relate to increases in FDI flows to South America. Practical implications The study recommends that quality of institutions matter to the flow of FDI and therefore, efficient institutional reforms should be a priority for policymakers as this creates a conducive investment environment to attract FDI in South America. Further, policies that are focused on promoting competition, open market, and effective non-corrupt public institution as well as open and transparent legal and regulatory regimes, and effective delivery of government services should be the priority of policymakers in South America (Mishra and Daly, 2007). Originality/value The study uses a single measure of institutional quality based on a broad set of institutional indicators. This broad measure of institutional quality differs from the available studies that mainly focused on single aspects of institutional quality, that is, either corruption, governance, or political risk.

Impact of Institutional Quality on Financial Development: Cross-Country Evidence based on Emerging and Growth-Leading Economies

ABSTRACT This study investigates the impact of institutional quality (IQ) on the financial development (FD) of 15 emerging and growth-leading economies (EAGLEs). We show that an institutional framework can efficiently handle ethnic fragmentation (ETHF) and can be a source of enhanced FD. The 2SLS results obtained by using ETHF as an instrument of IQ are highly consistent. We also perform three cross-sectional tests and find that openness, national culture, and economic growth significantly moderate FD through their positive interaction with IQ. Our results are robust across two measures of IQ and alternative estimation techniques as well as shed light on the crucial role of institutions in driving the FD of EAGLEs.

Institutional quality and the effectiveness of aid for trade

ABSTRACTTrade policy barriers and high transaction costs hinder developing countries from taking the full advantages of the global trading system. In order to help developing countries overcome the problem, the World Trade Organization (WTO) launched the Aid for Trade (AFT) initiatives in its Ministerial Conference held in Hong Kong in 2005. We examine the effects of AFT inflows on bilateral trade costs facing 133 developing countries while accounting for differences in their location on the contours of various measures of institutional quality. Our results from the estimation of a mixed effects (random-intercept and random-coefficient) model indicate that institutional quality significantly affects the extent to which AFT reduces bilateral trade costs. An important policy implication of our findings is that an economically robust and sustainable reduction in bilateral trade costs facing developing countries requires the presence of both promulgated and effectively functioning institutions such as regulatory power and the rule of law.

Implementing a perioperative efficiency initiative for orthopedic surgery instrumentation at an academic center: A comparative before-and-after study.

Optimizing surgical instrumentation may contribute to value-based care, particularly in commonly performed procedures. We report our experience in implementing a perioperative efficiency program in 2 types of orthopedic surgery (primary total-knee arthroplasty, TKA, and total-hip arthroplasty, THA).A comparative before-and-after study with 2 participating surgeons, each performing both THA and TKA, was conducted. Our objective was to evaluate the effect of surgical tray optimization on operating and processing time, cost, and waste associated with preparation, delivery, and staging of sterile surgical instruments. The study was designed as a prospective quality improvement initiative with pre- and postimplementation operational measures and a provider satisfaction survey.A total of 96 procedures (38 preimplementation and 58 postimplementation) were assessed using time-stamped performance endpoints. The number and weight of trays and instruments processed were reduced substantially after the optimization intervention, particularly for TKA. Setup time was reduced by 23% (6 minutes, P = .01) for TKA procedures but did not differ for THA. The number of survey respondents was small, but satisfaction was high overall among personnel involved in implementation.Optimizing instrumentation trays for orthopedic procedures yielded reduction in processing time and cost. Future research should evaluate patient outcomes and incremental/additive impact on institutional quality measures.

Exploring Non-Linear Effects of Political Institutions on Economic Institutions

Recent research has explored the determinants of economic freedom, an important measure of institutional quality. Elsewhere, some scholars have posited a negative relationship between the quality of economic institutions and democracy, at very high levels of democracy. This paper disaggregates the Polity IV index into a vector of twenty dummy variables to understand how differing degrees of democracy and autocracy may impact economic freedom, thereby leaving open the possibilities for non-linearities to express themselves in the analysis. Little evidence is found of any relationship in the long run, except possibly that very autocratic political institutions may have a negative effect.

Institutional quality and sovereign credit default swap spreads

AbstractWe examine how the quality of political, legal, and regulatory institutions impacts sovereign risk premia. An improvement in institutional quality significantly lowers a country's sovereign credit default swap (CDS) spread, even after controlling for domestic and global macroeconomic factors. The incremental effect of institutional quality may also be economically important in explaining the variations in the level of sovereign CDS spreads. The basic results are robust to alternative model specifications, samples, control variables, measures of institutional quality, estimation methods, and controls for endogeneity. Overall, the evidence suggests that institutional quality may play a significant role in explaining sovereign CDS spreads.

Institutions and the Allocation of Talent: Evidence from Russian Regions

Strong institutions attract talent to productive activities, whereas weak ones raise the appeal of redistribution and rent-seeking. We propose a theory that describes the impact of institutions on occupational choices over a range of abilities, and predicts that the sensitivity of such choices to the quality of institutions rises in talent when the latter increases from low to intermediate levels, and declines thereafter. To test these predictions empirically, we use a unique micro data set describing the choices of fields of studies by newly enrolled university students in Russian regions in 2011-2014. We show that the popularity of sciences and engineering, on one hand, and law and public administration, on the other, are linked to the quality of regional investment climate and other measures of institutional quality in a manner predicted by our theory. This confirms that investments in human capital reflect the quality of institutions, pointing to a mechanism connecting institutions to economic outcomes.

The Impact of National Institutional Quality on International Tourism Inflows: a Cross-country Evidence

This article explores the effects of the overall quality of national governance institutions of a country, along with the quality of some of its key characteristics, on international tourism inflows and the revenues a country derives from them. This article argues that increases in institutional quality reduce transaction costs and risks faced by both suppliers of international tourist services and tourists. We hypothesize that countries with "higher quality" of governance institutions are likely to attract more international tourists and derive more revenues from them. Our hypothesis is tested using panel data drawn from 108 countries between 1996 and 2011. The results strongly support the hypothesis. This study found that regulatory quality and the rule of law are the governance characteristics that have the most impact on international tourism flows. Improvement of institutional quality has more impact on tourism in high income countries than in emerging economies. The results are robust to different estimation methods, different measures of international tourism and institutional quality.

Trade aid, institutional quality, and trade

This paper uses a new database on trade aid to examine the relationships among trade aid, institutional quality, and trade. Using an instrumental variable approach and a large country sample, I find that trade aid has significantly higher positive effect on trade when it is interacted with the measure of institutional quality. This result is robust to various model specifications, tackling potential endogeneity issues, and excluding outliers. This finding provides key insights on policy recommendations for policymakers and donors.