Measures Of Institutional Quality Research Articles

Institutional quality and economic growth in upper-middle-income African countries

PurposeTo determine which proxy institutional quality variables are most significant for a country’s economic growth, the paper aims to investigate the effect of institutional quality on economic growth in upper-middle-income African nations between 2002 and 2021.Design/methodology/approachIn an attempt to account for countries' heterogeneity, the study uses a random and fixed effect model estimated by the generalized least squares.FindingsThe empirical findings demonstrate that the institutional quality measures of political stability, voice and accountability, corruption control and violence absence are statistically and favorably significant factors influencing the economic growth of upper-middle-income African countries.Originality/valueThis paper is unique in that it uses both random and fixed effects models to determine the effect of institutional quality on economic growth in the context of upper-middle-income African countries between 2002 and 2021.

Governance, institutional quality and economic complexity in selected African countries

AbstractNew economic thinking speculates that the diversification and sophistication of economic capabilities/structures is key in explaining why African countries lag in development behind the rest of the world. We question the extent to which non-traditional growth factors such as governance and institutional quality are related to economic complexity for 35 African countries. We estimate panel GMM regressions using 8 different measures of governance/institutional quality for both linear and kinked regressions using annual data collected between 1996 and 2021. The baseline estimates reveal a positive linear relationship between most measures of governance and institutional quality and economic complexity. Our sensitivity analysis further show that institutions/governance have stronger relationship with economic complexity in the post-global financial crisis era. Moreover, nonlinear or kinked relationships emerge once the data is segregated into different income and resource abundant groups. Altogether, our findings of a nonlinear relationship between institutions/governance and economic complexity are novel to the literature and offer unique insights on how African policymakers can use governance/institutions for improving the complexity of production processes.

Impact of Urbanization, Development Level, and Openness on Institutions in Bangladesh: An ARDL Investigation Using Two Measures of Institutional Quality

Future development policies require a better understanding of the various factors that affect the quality of institutions in Bangladesh. In this paper, we estimate empirical ARDL models to investigate the roles of urbanization, openness, and the level of development as determinants of institutional quality. We use two measures of institutional quality, both derived from the World Bank’s Worldwide Governance Indicators (WGIs). The first proxy, INQ, is a composite index developed from the six WGIs using Principal Component Analysis (PCA). The second indicator, AvgINQ, is the average of the six WGIs. For each indicator of institutional quality, three models were estimated, resulting in six models in total. The impact of urbanization on institutional quality is consistent in terms of sign and significance across all six models, a claim that cannot be made for the other variables in the model. The error correction term reflects dampening convergence to equilibrium for the first proxy for institutional quality but regular convergence when the second proxy is used. In terms of ARDL diagnostics, models with AvgINQ as the dependent variable perform better. The Johansen cointegration test confirms the existence of a long-term relationship among the variables in all the models. Pairwise Granger causality tests are also conducted. The findings emphasize the importance of managing urbanization pressure for better institutional quality.

Government size, institutional quality and economic welfare in Africa

PurposeMost African countries operate large government sizes but with little corresponding economic outcomes. Institutional economics however, show that strong institution is fundamental in promoting economic growth. This study examines the linkages between government size, institutional quality and economic welfare in Africa.Design/methodology/approachThis study deploys the System Generalized Method of Moments estimation strategy on panel data of 52 African economies from 2000–2018.FindingsThe result shows that government size has a negative impact on economic welfare, while institutional quality has a positive impact on economic welfare. The interaction of government size and institutional quality shows a positive impact on economic welfare, signifying synergy and complementarity. Thus, strong institutions counteract the adverse effects of large government size on economic welfare.Practical implicationsTo promote human development and economic welfare, and attain key Sustainable Development Goals such as good health and well-being, quality education, decent work and economic growth, African policy makers need to keep their government sizes at optimal levels and promote strong institutions.Originality/valueThis paper provides first-hand empirical evidence of the relevance of institutional quality in counteracting the adverse influence of large government size in Africa. It determines the thresholds of government size and uses a composite index as proxy for same. In addition, this study uses the World Governance Indicators and the Fraser Institute Economic Freedom Index as alternative measures of institutional quality and Gross Domestic Product per capita and Human Development Index as proxies for economic welfare.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-01-2024-0075

Cross Country Study of Human Capital Formation and USFDI Inflows

Purpose: The neo-classical theory of economic growth features the positive impact of the human capital of an economy on its growth. The inflow of foreign direct investment is one of the main components to carry forward the growth effect, this study investigates the impact of country-specific institutional quality and human capital on the cross-country variations of US-Foreign Direct Investment (FDI) inflows. Our core hypothesis is that Countries with better Human capital will attract more FDI if they have good quality institutions in terms of less risk in investment opportunities. Method: Using a set of panel data of US-Foreign Direct Investment (FDI) inflows for both developed and developing countries over the period 1984-2021. Result: The country-specific quality of institutions reinforces the impact of human capital on the inflow of US foreign direct investment in this study. Using two-dimensional panel data we find strong support for our hypothesis using a two-way fixed effects model. Our results are robust to the alternative measures of institutional quality. Implications: The strength of our approach is that in contrast to the previous works (1) we have used the USFDI inflow across countries that have been widely neglected in the related literature and (2) emphasis has been given to the conditional or joint impact of human capital and country-specific institutional quality in determining the cross-country variations in USFDI inflows.

The mixed effects of innovation strategies and bribery on firm performance: A Re-investigation via institutional quality

While a large body of literature has explored the impacts of bribery on firm performance, particularly in terms of innovation outcomes, a significant gap exists in understanding the effects of innovation strategies on firms’ performance as well as the influence of institutional quality on the interaction between innovation strategies and bribery. This paper empirically addresses this gap by investigating the complex effects of bribing and two distinct innovation strategies—independent innovation and spillover innovation. Using global firm-level evidence from the latest Business Environment and Enterprise Performance Survey, we employ three semiparametric methods to estimate productivity as proxy of firms’ performance. Our results show that independent innovation exerts sanding influences on productivity, while spillover innovation and bribery grease the wheels of firm performance. Moreover, bribery and spillover innovation mutually amplify each other's positive effects on firm performance. Further examinations indicate that the impacts of innovation strategies and bribing are significantly moderated by institutional quality. Under poor institutional quality with excessive government control or corruption, the positive influence of spillover innovation and bribing tends to be strengthened. Conversely, good institutional quality mitigates the greasing effects of spillover innovation and bribery. Through multiple robustness tests employing alternative methodologies, firm performance metrics, and institutional quality measures, these findings are consistently confirmed.

Pathways to Sustainability in Sub-Sahara Africa: Are Institutional Quality Levels Subservient in Achieving Green GDP Growth?

AbstractThere is a growing need for a transition to green economic growth (GGDP) given that the current economic system is largely environmentally unsustainable. This study thus addresses GGDP enhancement in less developed countries using the case of Sub-Sahara Africa (SSA) countries where institutional deficiencies are typically at the root of most resource depletion and environmental degradation issues. Six institutional quality measures were used namely corruption control, government effectiveness, political stability, regulatory quality, rule of law, and voice of accountability while controlling for other factors like industrialization, energy use, and population growth in the region. The study applied a battery of second-generation panel econometric techniques in the empirical analysis after which both Bootstrap Quantile regression (BQR) technique and panel ordinary least squares (OLS) estimation approaches were applied to observe the variables' roles on GGDP advancement in SSA. From the findings, corruption control and government (policy) effectiveness favorably impact Green GDP in SSA. However, both rule of law and regulatory quality performed poorly as they were insignificant to GGDP enhancement. Furthermore, all control variables promote GGDP except for population growth. Thus, the findings buttress the need to strengthen institutions for effective governance and quality environmental regulations to enhance GGDP growth towards actualizing sustainable development goals (SDGs) in the SSA region.

Are commodity exports a road to weaker institutions? Causal inference through a natural experiment

AbstractCountries rich in natural resources are typically major exporters of commodities worldwide. Specialization in such goods may create incentives for certain groups to hinder a country's institutional development. Therefore, in this article, we investigate the causal relationship between commodity exports and the institutional quality of 49 countries from 1997 to 2022. Given that commodity exports can both influence and be influenced by institutional quality, it is crucial to search for exogenous natural variations in commodity exports in combination with econometric modeling strategies. To address the endogeneity problem, we use a natural experiment—China's accession to the World Trade Organization—to establish a causal link between agricultural exports and institutional quality free from bias. Our results highlight that increased reliance on commodity exports is linked to detrimental effects on a country's institutions. It diminishes citizen participation, increases the risk of political violence, lowers public service quality, hampers private sector development, erodes trust in societal rules, and amplifies corruption. The findings confirm the negative relationship between commodity exports and institutional development. They also contribute to the resource‐curse debate by showing that agricultural exporters with abundant natural resources negatively impact institutions. Additionally, a causal relationship is established, demonstrating that focusing on commodity exports reduces institutional effectiveness, with the study's quality enhanced by using various commodity product bundles and alternating institutional quality measures. EconLit Citations: F13, F55, Q0.

Institutional Quality and Economic Misery in Nigeria

This paper makes an improvement to the traditional institutional quality-growth hypothesis originally documented in the North’s framework by investigating the implications of the quality of formal institutions on economic misery in Nigeria. The specific measures of institutional quality include economic freedom, liberal democracy, and the corruption perception index, while economic misery is measured using Hanke’s modified misery index. The datasets obtained from the World Bank, Heritage Foundation, Freedom House, Transparency International, and Carto Institute were analysed using descriptive statistics and the autoregressive distributed lag (ARDL) model, which was informed by the evidence of a fractionally integrated series. The findings showed that economic freedom significantly reduced economic misery in the short run. At the same time, evidence of a significant negative effect of liberal democracy on the misery index was established in both the short and long run. This suggests that deepening the democratic process has the potential to mitigate the economic misery faced by Nigerians through increased employment, a decrease in inflationary pressures and interest rates, as well as robust per capita growth. In addition, it was found that the corruption perception index contributed positively to the misery index. This indicates that the pervasive and systemic nature of corruption traps many Nigerians in miserable economic conditions. Owing to the findings, this paper recommends, among others, that policymakers should strengthen the democratic process and promote economic freedom by prioritising credible elections, entrenching the rule of law, and protecting property rights to mitigate the economic distress faced by Nigerians

Analysing governance‐led infrastructural development nexus in sub‐Saharan Africa: Does the moderating role of institutional quality matter?

AbstractGovernments engage in infrastructural developments across the globe, and the level of success often colligates with institutional quality levels. However, despite the presence of governance, the lack of well‐developed infrastructure has bedevilled sub‐Saharan African (SSA) countries for decades. Therefore, this study investigates the governance‐led infrastructural development hypothesis for the SSA region from an institutional quality perspective towards addressing the infrastructural deficit challenges of the region. A combination of advanced panel econometric techniques was applied to data collected from the African Development Bank, World Bank World Development Indicator, and International Monetary Fund (IMF) to investigate the governance‐led infrastructural development hypothesis in SSA while controlling for financial development, economic growth, and industrialization in the region. The findings show that the interaction of institutional quality measures and governance indicators significantly and positively induces infrastructure in sub‐Saharan Africa (SSA). Additionally, while economic growth and financial development yield no expected significant influence on infrastructural developments, industrialization plays a crucial role, as its spillover effects are not confined to boosting economic growth alone but also to infrastructural transformations. Thus, the provision of policy frameworks by authorities to strengthen institutions and promote good governance is vital for articulating and facilitating infrastructural development plans for SSA.

Fundamentals of Institutional Quality and Economic Freedom

ABSTRACT: Social scientists have extensively studied the causes of good institutions, including the origins of economic freedom. Results concerning the causes of different kinds of institutions are often similar, often concluding that the geography, environment, and culture are important factors. However, a recent political economy framework suggests that certain dimensions of economic freedom, namely specific dimensions of the size of government (government consumption, transfers and subsidies, and the top marginal tax rate), differ systematically from other dimensions of liberalization. This paper explores these arguments by constructing an index of a set of consensus predictors of institutional quality: ethnic fractionalization (predicts negatively), the natural log of the population size (negatively), absolute latitude (positively), natural resource rents (negatively), the presence of the country in the Americas (negatively), British legal origins (positively), the presence of the country in Eurasia (positively), and island geography (positively). The countries with the “best” fundamentals for institutional quality are Iceland, Ireland, Malta, Finland, and Cyprus, while the five with the “worst” fundamentals are Angola, Nigeria, Chad, Burkina Faso, and Ghana. It then takes this index of “fundamentals” of institutional quality and shows that, although they predict economic liberalism as a whole (as measured by the Economic Freedom of the World index) as they would predict other measures of institutional quality, they predict oppositely (i.e., corresponding to larger governments) for the dimensions of the size of government listed above. The result is congruent with the predictions of the political economy model. Additionally, this result is not contingent on the inclusion of any one of the “fundamental” variables, although natural resource rents and absolute latitude appear to be the most important variables. Countries with considerably more economic freedom than would be predicted by their fundaments include Peru, Singapore, the United States, Chile, and Canada; should deviations from fitted values be seen as presaging future movements in institutions, these countries are the most likely to see upcoming declines. The aforementioned political economy model implies that these findings are the result of complexities involved in the interaction between state capacity and different dimensions of economic liberalization.

Impact of Urbanization, Development Level, and Openness on Institutions in Bangladesh: An ARDL Investigation Using Two Measures of Institutional Quality

Impact of Urbanization, Development Level, and Openness on Institutions in Bangladesh: An ARDL Investigation Using Two Measures of Institutional Quality

The relationship between institutional quality, trust and private savings

Abstract This paper draws on macroeconomics, the economics of institutions and the economics of trust to explain private savings at the national level for 33 OECD (mostly European) countries from 2002 to 2012. More specifically, it raises two questions: (i) is it the quality of institutions or trust in institutions that drives private savings? (ii) if trust matters, what is the appropriate institutional level at which it operates? To answer these questions, we add to the usual explanatory variables of private savings three measures of institutional quality and six measures of institutional trust, distributed between the following institutional levels, presented in assumed hierarchical order: political, legal, financial and social. We find that trust in political institutions is the most significant driver of private savings. This contributes to the literature underlining the importance of subjectivity in social and economic phenomena and suggests, for private bank savings in countries having highly regulated banking systems, the existence of a hierarchy of trust in which trust in the highest-ranking institutions (political – and to a lesser extent legal – institutions) acts as a substitute for trust in every lower-ranking institution (financial institutions and social trust).

Utilisation of Open Educational Resources by Academics and Students among Nursing College in Siliguri Subdivision

This study investigates the perspectives and utilization of Open Educational Resources (OER) among faculty members and students in five nursing colleges located in Siliguri sub-division. With a total sample population of 250, the research delves into the factors influencing OER adoption at macro, meso, and micro levels. Institutional policies, quality measures, licensing issues, and micro-level factors such as perceived usefulness and ease of use are analyzed. Additionally, the benefits of OER for academics, challenges in student efficacy, and pedagogical integration are explored. Recommendations are provided to maximize OER utilization through awareness promotion, professional development, and addressing adoption challenges, ultimately enhancing the quality and accessibility of education.

Do Innovation and Institutional Quality Elevate Economic Growth? Empirical Evidence from Developing Countries

Research Highlights • An assessment of institutional quality, innovation, and economic growth in developing countries. • Long-run causality from innovation and institutional quality to economic growth is present. • Short-run directions of causality are varied among variables of interest. • Innovation and institutional quality generally positively impact economic growth. Continuous innovation is the lifeblood of a competitive economy. Furthermore, and arguably, the existence of institutions of governance of quality can be a catalyst for emerging economies to transition up the universal innovation value chain. In this context, we investigate temporal causal interactions among institutional quality, innovation, and economic growth for developing countries (DCs) spanning the period of 2005–2020. Employing a vector error-correction model (VECM), we find that for each case and specification (49 instances), there is evidence of the long-run causality from institutional quality and innovation to economic growth. Stated another way, in the long run, institutional quality and innovation Granger-cause economic growth. However, the short-run causality results differ depending on the specific measures of innovation and institutional quality. The strongest short-run conclusion is support for the feedback hypothesis for economic growth and innovation where there is a strong endogenous relationship between innovation, institutional governance, and economic growth. The empirical analysis shows over 70% of our observations support that economic growth and innovation jointly determine each other in the short run. The results suggest that DCs should develop and pursue long-term growth strategies that simultaneously develop innovation and improve institutional governance.

The impact of IFRS mandate and institutional governance on underpricing and aftermarket performance of IPO shares in Turkey

Along with the European Union, policymakers in Turkey passed a regulation that mandated all listed companies use the International Financial Reporting Standards (IFRS) starting from January 1, 2005. Using a before-after estimation design, this study examines the impact of this policy change and the role of institutional governance quality on the initial trading day and aftermarket trading performance of initial public offerings (IPO) in Turkey from 1998 to 2019. The results show that the IFRS mandate does not affect initial trading day returns but improves the aftermarket trading performance of IPO shares. This finding may imply that Turkey’s secondary market also suffers from information asymmetry and that IFRS-compliant reports help alleviate this problem. Furthermore, none of the six institutional governance quality measures tested loaded significantly against initial trading day or long-term returns. However, when examined together, two institutional measures with a negative value, voice and accountability, and political stability, offset the positive effect of the IFRS-compliant reporting on long-term IPO returns, providing support to the premise that institutional quality matters for realizing the economic benefits of the IFRS mandate.

Institutional imbalance moderating the linkage between GVC participation and economic growth: empirical evidence

PurposeParticipation in global value chains (GVCs) is increasingly related to the economic growth of any country. The conceivable beneficial impact of GVCs on economic growth differs across countries and could be modified with the countries' domestic institutional arrangements. However, ignoring the complementarity between the components of institutional quality led to ignorance of the institutional imbalance present in the country. Hence, the primary purpose of this study is to examine the role of institutional imbalance as a moderating variable between GVC participation and economic growth from 2000 to 2018.Design/methodology/approachTo address the issue of endogeneity among the variables in the model, the study employs the generalized methods of moments (GMM) as an econometric analysis method.FindingsThe study finds that well-functioning domestic institutions facilitate the positive impact of GVC participation on economic growth. Conversely, an increased institutional imbalance harms the relationship between GVC participation and economic growth. These findings emphasize a balanced portfolio of institutional components. It advocates the holistic development of each component to reap greater benefits for GVC participation for any country. The study highlights that the weakness in one of the components must be addressed rather than substituted by increasing the strength of another component.Research limitations/implicationsThe policies should be framed to improve the weakest component first, followed by other components of institutional quality. Simultaneous reforms involving all the dimensions of institutional quality would smoothen the path of transforming GVCs trade to the country's economic development. Additionally, the high institutional imbalance can provide a bird's eye view to policymakers to work on specific aspects of institutional quality more rigorously.Originality/valueThe existing literature has used a combined measure of institutional quality as a mediator variable while measuring the impact of GVC participation on economic growth. While using a combined measure, it ignores the complementarity among its components. Assuming substitutability among various components may lead to an incorrect estimation. Using the arguments proposed by Bolen and Sobel (2020), the present study considers the existence of complementarity among various components of institutional quality. It calculates the institutional imbalance used as a moderating variable while estimating the impact of GVC participation on economic growth.

2023 Investment Report on Vietnam An Outlook for Investing Opportunities in Vietnam

This report presents a comprehensive analysis of the investment landscape in Vietnam, highlighting the opportunities and challenges that investors may encounter. The nation is desirable for foreign investment as it is a quickly growing emerging market that has adopted robust economic development, favorable demographics, and a pro-business climate. The report begins by introducing the statistics regarding the economy, such as the macroeconomic indicators, social and institutional quality measures, and the political climate that helped shape Vietnam's economy today. In addition, the report will analyze government policies and debt to evaluate whether the nation is in a crisis and embraces foreign investors. Furthermore, the report will assess the domestic equity market to present the potential benefits investors might gain. Finally, based on the report's findings, Vietnam presents compelling investment opportunities driven by its favorable economic conditions, supportive government policies, and vibrant sectors. However, navigating such opportunities in the Vietnamese market would still require a nuanced understanding of the risk investors are willing to take compared to the potential benefits. This investment report aims to assist potential investors in making informed decisions and capturing the perspective of this dynamic emerging market.

Foreign Debt, Institutional Quality and Economic Performance in Nigeria: An Experimental Evaluation

Nigeria is the largest economy in Africa and the largest exporter of crude oil in Africa, yet Nigeria has a huge foreign debt portfolio and weak institutions. It is against this backdrop that this study examines the impact of foreign debt and institutional quality on economic performance in Nigeria. Data used for the analysis were quarterly data that ranges from 1996Q1 to 2019Q1. Foreign debt service was used as a measure of foreign debt while corruption control and government effectiveness were used as measures of institutional quality. Economic performance which is the dependent variable was measured using Gross Domestic Product. The study also examines how institutional quality influences the relationship between foreign debt and economic performance in Nigeria. Autoregressive Distributed Lag Model was used to specify and estimate the relationship between the variables. The result of the analysis indicates that foreign debt has an insignificant negative effect on economic performance in the short run and also negative insignificant effect in the long run too, corruption control has a significant positive effect on economic performance only in the short run, Government effectiveness does not have a significant effect in the economy, being the two; the short run and the long run, on that account corruption control influences the relationship between foreign debt and economic performance significantly and negatively only in the short run but also positively and insignificantly in long run. Mechanism should be put in place to ensure that foreign debts are properly utilized on the projects they were meant for.

Global value chains in sub-Saharan Africa: The role of business regulations, policies and institutions

This paper investigates the impact of business regulations, policies and institutions on global value chains (GVCs) in Sub-Saharan Africa (SSA). It uses the latest release of the Eora MRIO IO database to compute the GVC indictors. The World Bank's doing business indicators are used as business regulatory measures and the Country Policy and Institutional Assessment (CPIA) indicators are also used as policies and institutional quality measures. The empirical evidence is based panel data analyses and panel quantile regressions as the estimation techniques. The findings show that business regulations, institutional and policy initiatives are critical factors in determining the level of GVC participation in Africa. The results also provide evidence that Africa countries could enhance their participation in the global value chain through improved business regulations, policies and institutions.