Institutional quality and economic growth in East African economies

Moga Tano JILENGA, Xu HELIAN

Abstract


Abstract. This study examines the effect of quality of institutions on economic growth in five East African countries using panel data for the period spanning from1996 to 2015. Fixed effects (FE) and random effects (RE) models were employed for estimation. Using Hausman test, FE was earmarked to be more appropriate model for this study. The empirical findings show that the quality of institution significantly impacts on economic growth. Political stability, government effectiveness, rule of law and control of corruption in particular are significant variables. Regulatory quality, voice and accountability indicate insignificant effect on growth. The results suggest that governance that promotes strong institutions is an important condition for economic growth. Particular focus should be focused on enhancing political stability, government effectiveness, rule of law and control of corruption so as to attain economic development. 

Keywords. Institutional quality, Economic growth, East Africa, Fixed effects.

JEL. O43, E20, C33.

Keywords


Institutional quality; Economic growth; East Africa; Fixed effects.

Full Text:


References


Acemoglu, D., Johnson, S., & Robinson, J.A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91(5), 1369-1401. doi. 10.1257/aer.91.5.1369

Acemoglu, D., & Robinson, J.A. (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty, London: Profile Books.

Acemoglu, D., & Robinson, J.A. (2010) The role of institutions in growth and development. Review of Economics and Institutions, 1(2), 1-33. doi. 10.5202/rei.v1i2.14.

Acemoglu, D., Johnson, S., & Robinson, J.A. (2002). Reversal of fortune: geography and institutions in the making of the modern world income distribution. Quarterly Journal of Economics, 117(4), 1231-1294. doi. 10.1162/003355302320935025

Beck, T., & Laeven, L. (2005). Institution building and growth in transition economies, Journal of Economic Growth, 11(2), 157-186. doi. 10.1007/s10887-006-9000-0

Benyishay, A., & Betancourt, R. (2010) Civil liberties and economic Development, Journal of Institutional Economics, 6(3), 281-304. doi. 10.1017/S1744137410000081

Bernard, A., & Jones, C. (1996) Productivity and convergence across U.S. states and industries. Empirical Economics, 21(1), 113-135. doi. 10.1007/BF01205496

Dollar, D., & Kraay, A. (2003). Institutions, trade, and growth, Journal of Monetary Economics, 50(1), 133-162. doi. 10.1016/S0304-3932(02)00206-4

Grogan, L., & Moers, L. (2001).Growth empirics with institutional measures for transition countries, Economic Systems, 25(4), 323-344. doi. 10.1016/S0939-3625(01)00030-9

Hall, R.E. & Jones, C.I. (1999). Why do some countries produce so much more output per worker than others?, Quarterly Journal of Economics, 114(1), 83-116. doi. 10.1162/003355399555954

Heckelman, C., & Powell, B. (2010). Corruption and the institutional environment for growth. Comparative Economic Studies, 52(3), 351-378. doi. 10.1057/ces.2010.14

Hodgson, G.M. (1998). The approach of institutional economics, Journal of Economic Literature, 36(1), 166-192.

Lee, K., & Kim, B. (2009). Both institutions and policies matter but differently for different income groups of countries: determinants of long-run economic growth revisited. World Development, 37(3), 533-549. doi. 10.1016/j.worlddev.2008.07.004

Lucas, R. (1988). On the mechanism of economic development, Journal of Monetary Economics, 22(1), 3-42. doi. 10.1016/0304-3932(88)90168-7

Kaufmann, D., Kraay A., & Mastruzzi M., (2005). Governance matters IV: Governance indicators for 1996 - 2004. World Bank Policy Research Working Paper, No.3630.Washington, D.C. doi. 10.1596/1813-9450-3630

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The worldwide governance indicators: Methodology and analytical issues. World Bank Policy Research Working Paper No.5430. doi. 10.1017/S1876404511200046

Knack, S., & Keefer, P. (1995). Institutions and economic performance: Cross-country tests using alternative institutional measures, Economics and Politics, 7(3), 207-227. doi. 10.1111/j.1468-0343.1995.tb00111.x

Kormendi, R.C., & Meguire, P.G. (1985). Macroeconomic determinants of growth: cross-country evidence, Journal of Monetary Economics, 16(2), 141-163. doi. 10.1016/0304-3932(85)90027-3

Mankiw, N.G., Romer, D., & Weil, D.N. (1992). A contribution to the empirics of economic growth, Quarterly Journal of Economics, 107(2), 408-437. doi. 10.2307/2118477

Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110(3), 681-712. doi. 10.2307/2946696

North, D.C. (1990). Institutions, Institutional Change and Economic Performance, Cambridge, MA: Cambridge University Press.

North, D.C. (1991). Institutions, Journal of Economic Perspectives, 5(1), 97-112.

North, D.C. (1992) Institutionen, institutionellerWandel und Wirtschaftsleistung, Tübingen: Mohr Siebeck.

Pande, R., & Udry, C. (2005). Institutions and development: A view from below. Yale University Economic Growth Center, Discussion Paper, No.928. [Retrieved from].

Rodrik, D. (1999). Where did all the growth go? External shocks, social conflict and growth collapses. Journal of Economic Growth, 4(4), 385-412. doi. 10.1023/A:1009863208706

Rodrik, D., Subramanian, A., & Trebbi, F. (2002). Institutions rule: the primacy of institutions over integration and geography in economic development. Journal of Economic Growth, 9(2), 131-165. doi. 10.1023/B:JOEG.0000031425.72248.85

Romer, P.M. (1986). Increasing returns and long run growth, Journal of Political Economy, 94(5), 1002-1037. doi. 10.1086/261420

Romer, P.M. (1990). Endogenous technological change. Journal of Political Economy, 98(5), 71-102. doi. 10.1086/261725

Siddiqui, D.A., & Ahmed, Q.M. (2009). Does institution effect growth in Pakistan? An empirical investigation. MPRA Paper, No.19744. [Retrieved from].

Solow, R. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), 65-94. doi. 10.2307/1884513

Swan, T. (1956). Economic growth and capital accumulation. Economic Record, 32(63), 334-361. doi. 10.1111/j.1475-4932.1956.tb00434.x

Voigt, S. (2002). Institutionenökonomik, Paderborn: Fink.

Williamson, O.E. (2000). The new institutional economics: Taking stock, looking ahead, Journal of Economic Literature, 38(3), 595-613. doi. 10.1257/jel.38.3.595

Zhuang, J., De Dios, E., & Martin, A.L. (2010). Governance and institutional quality and the links with economic growth and income inequality: With special reference to Developing Asia. Asian Development Bank Economics, Working Paper Series, No.193. [Retrieved from].




DOI: http://dx.doi.org/10.1453/ter.v4i3.1365

Refbacks

  • There are currently no refbacks.




.......................................................................................................................................................................................................................................................................................................................................

Turkish Economic Review - Turk. Econ. Rev. - TER - www.kspjournals.org

ISSN: 2149-0414

Editor: ter@ksplibrary.org   Secretarial: secretarial@ksplibrary.org   Istanbul - Turkey.

Copyright © KSP Library