Template-type: ReDIF-Paper 1.0
Author-Name: Verspagen, Bart
Author-Email: verspagen@merit.unu.edu
Author-Workplace-Name: UNU-MERIT / MGSOG, and School of Business and Economics,
	 Maastricht University
Title: Stylized facts of governance, institutions and economic development. Exploring
	 the institutional profiles database   
Abstract: The empirical literature on economic growth agrees that institutions and
	 governance are important determinants of long-run economic growth rates.
	 As a stylized fact, this literature points to a strong correlation
	 between the level of GDP per capita and the general development level of
	 institutions and governance. However, the growth rate of GDP per capita
	 itself, as well as other indicators that are broadly associated with the
	 level of economic development, are generally much less strongly
	 correlated with the level of institutional development. We document
	 these correlations, and argue that there is a need for a broader set of
	 stylized facts about institutions, governance and economic development,
	 covering the broader set of economic indicators, including the growth
	 rate itself. To find such stylized facts, we use canonical correlation
	 analysis. We use a database on institutions and governance that has a
	 very large number of indicators, and our analysis produces a number of
	 aggregated measurements of institutions and governance that broadly
	 correlate with patterns of economic development. The analysis confirms
	 the correlation between the general level of economic development on the
	 one hand, and institutional development on the other hand, which is the
	 core stylized fact identified in the literature. In addition to this,
	 our analysis points to the general attitude towards markets, and the
	 level of financial development as specific dimensions of the
	 institutional and governance characteristics of a country that correlate
	 highly with specific development patterns. In particular, we find that a
	 positive attitude towards markets combined with a low level of financial
	 development goes together with growth rates, based on catching-up. We
	 also find that a tendency towards market steering combined with strong
	 financial development goes together with a high involvement in
	 international trade (openness), combined with a low investment rate. 
Classification-JEL: O10, O16, O17, O43
Keywords: institutions, governance, economic development 
Series: UNU-MERIT Working Papers
Creation-Date: 2012
Number: 2012-036
File-URL: https://unu-merit.nl/publications/wppdf/2012/wp2012-036.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2012036