Role Of Institutional Quality Research Articles

Role of institutional quality in economic development: A case study of Asian countries

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.

Fostering Labour Productivity Growth for Productive and Decent Job Creation in Sub-Saharan African Countries: the Role of Institutional Quality

The majority of jobs created in Africa are informal, low-paying jobs that do not allow employees to live decently. An improvement in labour productivity will contribute to the creation of productive and decent jobs. The objective of this work is to study the effect of institutional quality on labour productivity in sub-Saharan Africa (SSA). To do this, we consider a panel of 31 countries over the period from 1996 to 2016. Thus, we construct an empirical model based on the stochastic frontier production function developed by Battese and Coelli (1995), to which we apply panel estimation techniques (static and dynamic), particularly with system generalized method of moments (System-GMM) and within estimators. Our results show that institutional quality indicators have a positive and significant influence on labour productivity. Political stability, government effectiveness and the rule of law are the indicators that contribute most to increasing labour productivity in sub-Saharan Africa. A series of robustness tests are performed to confirm our results. Specific indicators that contribute to labour productivity growth in sub-Saharan Africa are identified for the different sectors of the economy (agriculture, industry, services). These results enable us to identify several policy implications relevant to African decision-makers in order to create productive and decent jobs, especially for young people.

Foreign Direct Investment and Economic Growth relationships: The moderation role of institutional quality

Most studies on the effect of the role of institutional quality on the relationship between foreign investment and economic growth have been carried out in Western countries. Very few studies on the above-mentioned relationships have been done in Asian countries during. This paper will be conducted in Asian countries using the following three models: Pooled OLS, Fixed effect model, and Random effect model. This paper uses secondary data from 10 Asian countries from 2011 to 2018. The empirical results show that (1): FDI has a positive effect on the economies of the countries. Asia between 2002 and 2018 (2) The quality of the state strengthens the impact of FDI on the economies of Asian countries between 2011 and 2018. These findings imply that if improving the quality of institutions, the state will attract more FDI and economic development The research paper is based on the scientific approach of quantitative methods to solve the problems posed, practical and effective service for the completion of the research purpose. The secondary data collected from the worldbank.org to create asymmetric data tables will be processed on STATA software.

Does Institutional Quality increase inequalities in Africa?

This article appreciates the role of Institutional quality in addressing inequalities in Africa. Starting from Piketty’s (2015) holistic analysis of income inequalities and their sources, we have integrated two contemporary forms of inequalities (environmental and housing). We carry out an estimation of a panel data model using the Maximum Likelihood Method (MLM) on a sample of 48 African countries for the period 1996–2016, which yielded two main results. Firstly, governance indices reduce income inequality and have a significant adverse effect on housing and environmental inequalities. Secondly, Longevity of the regime and the Term in power of the political party of the chief executive exacerbate the inequalities in all its forms.

Foreign aid and economic growth in Nigeria: The role of institutional quality

This study examined the moderating effect of institutional quality on the foreign aid-economic growth nexus in Nigeria from 1984 to 2018 through the use of Johansen and canonical cointegration regression. Findings from the study indicate that while foreign aid has a separate positive effect on economic growth, the quality of institutions in the country diminishes and leaks out this positive effect. To this end, fiscal authorities in Nigeria need to review the existing institutional framework guiding the sourcing, disbursement and utilization of foreign aid with a view to detecting any loopholes and lapses that encourage diversion of fund and institutionalized corruption which prevent it from promoting growth.

The role of institutional quality and environment-related technologies in environmental degradation for BRICS

An expanding body of literature has highlighted the environment–growth nexus. However, the literature is scarce on the role of environmental technologies and institutional quality in environmental pollution. The present study aims to contribute to the existing knowledge by utilizing environment-related technologies (ERT), institutional quality (IQ), and energy consumption to investigate ecological footprints (EF) as a proxy for the environment in BRICS economies in a framework based on environmental Kuznets curve (EKC) theory. By using data from 1992 to 2016, long- and short-term relationships are estimated through cross-section augmented autoregressive distributive lag model, augmented mean group estimator, and common correlated effects mean group. The second-generation econometric tools indicate that IQ and ERT negatively affect ecological footprints, thereby implying reductions in environmental degradation. The EKC hypothesis is not validated, implying that an increase in economic activities causes an increase in pollution. Overall, BRICS economies should improve their quality of institutions and enhance investments in environmental technologies to achieve a sustainable environment in the future. Findings are robust to practical policy implications.

The Role of Institutional Quality in Trade-Growth Nexus: The Case of Emerging Economies

This study aims at investigating the relationship between trade openness and economic growth after incorporating the role of institutions. Generalized method of moments (GMM) system technique is applied by using data of 17 major emerging market economies (EMEs) for the period 1995-2018. The empirical evidence suggests that trade liberalization affects economic growth positively and significantly while institutions play a supportive role in this regard. The interaction terms are also generated to test the impact of the institutional environment on the trade-growth relationship. The empirical results are robust to various specifications, confirming the positive role of institutions in trade- growth nexus. The countries should develop a conducive institutional and political environment to ensure the beneficial growth effects of trade liberalization policy.

Inclusive growth and environmental sustainability: the role of institutional quality in sub-Saharan Africa.

Growth and environment literature has gained much attention in recent times. However, the emphasis was laid on the conventional economic growth or gross domestic product at the expense of the category of growth that is evenly shared and whose social benefits are far reaching than just an increase in the overall economic pie. It is on this note that the present paper looks at the type of relationship between growth and environment with particular emphasis on growth that is all inclusive. Data are sourced from World Governance and Development Indicators (WGI and WDI) and an index of inclusive growth constructed using principal component analysis (PCA). The findings indicate that institutional quality plays a major role in enhancing growth-environmental sustainability. The results further find a new phenomenon called environmental inclusive-growth Kuznets curve (EIKC) and added to the EKC debate. That is, at the early phase of inclusive growth, environmental degradation rises as well but environmental quality improves with the rise in inclusive growth at a higher phase of the relationship. The study recommends that policymakers should encourage the economies of sub-Saharan Africa to pursue inclusive growth and not compromise it for sustainability since sustainability comes later. Institutional quality which serves as a transmission mechanism in the study can as well be used as a robust and efficient structure to avoid adverse environmental externalities of inclusive growth.

Shadow economy, institutions and environmental pollution: insights from Africa

PurposeThis study investigates the effect of shadow economy on environmental pollution and the role of institutional quality in moderating the impact in African countries between 1991 and 2015.Design/methodology/approachThe study employs three pollutant variables namely: carbon dioxide emissions per capita, methane emission and nitrous oxide emission as robustness check. Also, battery of methodologies; ordinary least squares, fixed effects and system generalised method of moments are used to drive out the conclusions of this study.FindingsThe findings reveal that shadow economy and institutional quality contribute significantly to environmental pollution in Africa. Further, the interactive effect of shadow economy and institutional quality worsens environmental quality in the region. This reveals that weak institutional quality recorded in the region increases the level of shadow economy, thereby intensifying environmental pollution.Practical implicationsThe study concludes that weak institutional framework in the region reinforces shadow economy and environmental pollution. Hence, findings from this study can help policymakers in the region to better understand the role of institutional quality in reducing shadow economy and environmental pollution.Originality/valueThis study enriches one’s understanding on the role of institutional quality in the relationship between environmental quality and shadow economy in African context. It investigates the direct and indirect impact of institutions and shadow economy on environmental quality. The study also uses three different robust variables to measure environmental pollution (carbon dioxide (CO2) emissions per capita, methane emission and nitrous oxide emission) for sensitivity analysis.

Fiscal Response to Terrorism in Pakistan: The Role of Institutions

This study empirically estimates the fiscal consequences of terrorism in Pakistan by using annual time series data from 1984 to 2016. By employing the autoregressive distributed lag (ARDL) technique, the study has gauged the impact of terrorist incidents on two important facets of fiscal policy, namely, tax revenue and defense spending. The results reveal that terrorism has detrimental ramifications for fiscal policy in Pakistan. Specifically, on the one hand, an increase in terrorist incidents tends to bring a fall in tax revenue while on the other hand, they induce a rise in defense outlays, thus deteriorating both fronts of the fiscal position. Notably, the moderating role of institutional quality appears significant and indicates that institutional quality has not only a significant direct impact on fiscal policy, but it also helps in completely mitigating (reducing) the harmful impact of terrorism on defense spending (tax revenue) in Pakistan. These findings suggest that there is a need to take appropriate steps for strengthening institutional setup to control the fallouts of terrorism on fiscal behavior of the government of Pakistan.
 Keywords: Terrorism; Tax Revenue; Institutional Quality; ARDL
 JEL Classification: E62; H2; E02; H5; F35

Recent advances in energy usage and environmental degradation: Does quality institutions matter? A worldwide evidence

Environmental quality has become an important concern and topic of research recently in preceding studies. Several factors includes in environmental degradation such as the usage of energy from fossil fuels, releasing of high carbon dioxide, sulfur dioxide and air pollution, greenhouse effect and so on. Mixed conclusion has been achieved by studying several factors related to environmental quality in the prevailing literature. The current study therefore explore the relationship of environmental factors by taking into consideration the role of institutional quality and technological progress in the global panel of 188 countries. Panel data for the period of 2002 to 2018 is used and have applied both static and dynamic models includes OLS, fixed effect, GMM and system GMM models. The findings indicate that the use of renewable energy form renewable sources instead of energy use from fossil fuels has been found beneficial for environment as non-renewable energy consumption increase carbon emission in our results. Financial development positively while FDI have negative impact on carbon emission. Technological progress exerts positive impact where most of institutional quality variables have been found significant for carbon emission. The findings suggest policy makers on further polices by using renewable energy sources and suggest focusing on technological innovation and funding renewable energy projects through financial institutions to achieve higher quality of environment.

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.

The Role of Institutional Quality on Participation in Global Value Chains

We explore the effect of institutional quality on participation in global value chains (GVCs) by distinguishing between backward and forward participation. Using a sample of 63 OECD and non-OECD countries during the period 2005–2015, the results obtained from a panel data estimation are twofold. First, we obtain a positive association between institutional quality and participation in GVCs, with slightly greater effects for backward than for forward participation. Second, we find that results are sensitive to the dimension of the institutions considered, with Voice and Accountability being associated with more backward participation, and Rule of Law and Political Stability with more forward participation

Foreign aid and entrepreneurship in Africa: the role of remittances and institutional quality

This study investigates the impact of foreign aid and remittance inflows on entrepreneurship progress in Africa. The role of institutional quality in the relationship between foreign aid and entrepreneurship is also investigated. We explore data of 19 African countries for a period of 2006–2017, and panel data regression techniques are employed. The study finds that: (1) Foreign aid impact on entrepreneurship is negative. (2) The remittances mediate the negative impact of foreign aid on entrepreneurship. (3) Institutional quality mediates the negative impact of foreign aid on entrepreneurial progress. (4) The threshold level of remittance at which foreign aid would meaningfully enhance entrepreneurship is 10.59 as a percentage of GDP while that of institutional quality is 5.04 on a scale of 10 point. (5) The role of remittances and foreign aids is complementary in firm start-up activities. (6) Institutional quality plays important roles in moderating impact of foreign aid on firm start-up activities. In addition, our results show that concentration in banking industry does not benefit entrepreneurial activities. The study concludes that foreign aids and remittances perform complementary roles in improving the level of entrepreneurial development in Africa. The strong institutional environment is very important in promoting entrepreneurial success. These findings are robust to alternative estimations.

FDI inflows and economic growth in Arab region: The institutional quality channel

AbstractThis study empirically investigates the possible role of institutional quality in absorbing foreign direct investment (FDI) flows' spillovers for growth in a group of Arab countries. The analysis is performed by employing system GMM estimation in panel data comprising 11 Arab countries over the period 1988–2012. It develops overall indexes of doing business and economic freedom indicators using the principal components analysis (PCA) as weights. The study finds that the quality of institutions plays an important role in enhancing economic growth via indirect impact by absorbing spillovers of FDI inflows. On the one hand, the study reveals that greater macroeconomic stability and financial development have a positive influence on growth. The results of this study have several implications for policy makers.

Public Spending and Economic Growth : The Role of Institutional Quality

Public Spending and Economic Growth : The Role of Institutional Quality

Financial Development, Institutional Quality and Economic Growth: Evidence from ECOWAS Countries

Most of the literature that explored the relationship between financial development and economic growth taking into consideration the roles played by institutional quality in the ECOWAS region still debates on the roles of institutional quality on economic growth. This study used data from 1996-2017 for 15 emerging economies within the ECOWAS by applying two-step SYS GMM (SGMM) estimators. The following conclusions were developed: first, the study discovered that financial development has no significant and positive impact on economic growth in the ECOWAS region. Secondly, regulatory quality and control of corruption, which are considered as institutional quality variables, have opposing results with control of corruption reducing growth as well as regulatory quality variable increasing growth. Again, the results indicate that capital formation has a positive association with growth and labor force influencing growth negatively. Finally, due to a lack of proper corruption control systems in the region and poor financial sector development, growth cannot improve.

The role of institutional quality and human capital for economic growth across Chinese provinces – a dynamic panel data approach

ABSTRACT There is an ongoing debate within the economic growth and development literature whether institutions or human capital are more important for economic growth. We add further arguments to this discussion by focusing on a particular country, namely China. China is an interesting case study since it is often regarded as an exception by having achieved miraculous growth for more than three decades despite relatively low institutional quality. We employ a dynamic panel data model to analyze the role of improvements in institutional quality and human capital accumulation for the economic success of a province in China over the period 2003 to 2007. Using system GMM estimation, we find that while growth in human capital fosters economic growth all over China, only coastal provinces record a positive effect of institutional improvements on the growth rate of per capita income.

External Shocks, Institutional Quality, and Macroeconomic Performance in Nigeria

The study examines the relative contributions of external shocks and institutional quality to macroeconomic performance in Nigeria, using Structural Vector Autoregressive (SVAR) approach. The study establishes the dominance of the relative contributions of external shocks measures over institutional quality to macroeconomic performance in the country. Even though the dominance of terms of trade and foreign aid is highlighted, the role of institutional quality is equally important as it also has significant positive effect on performance. The study concludes that both external shocks and institutional quality play significant roles, and hence, posits the existence of favorable institutional environments as a panacea to successfully absorbing the influence of external shocks which are exogenous to the economy.

International subsidiary performance of Indian multinationals in the extractive sector: The role of institutional quality, corruption and investment regime

The paper examines the impacts of host country's institutional quality, corruption perception, investment regime, economic growth and resource availability on performance of 150 overseas subsidiaries of Indian multinationals spread across 42 host countries in the extractive sectors of metals and mining during 2005–2017. The dynamic panel data estimation suggests that overseas subsidiary performance is better in countries with superior institutional quality. However, the impact of corruption perception has been sample specific. Further, performance of such subsidiaries was found to be better in countries with underdeveloped investment regime and where the competition from other investors is lower. The economic growth in the host country plays limited role in improving subsidiary performance as these subsidiaries are driven by resource-seeking motive rather than seeking local market. While institutional quality and investment regime are important determinants of subsidiary performance; the role of corruption, economic growth and resource availability in determining the subsidiary performance in the extractive sectors was found to be contrary to conventional expectation, which suggests that the direction of impact of host country-specific variables on subsidiary performance can significantly vary based on the motive of foreign direct investment.