Institutions and Growth Revisited: OLS, 2SLS, G2SLS Random Effects IV Regression and Panel Fixed (within) IV Regression with Cross-Country Data

21 Pages Posted: 3 Oct 2011 Last revised: 26 Oct 2012

See all articles by Dushko Josheski

Dushko Josheski

University Goce Delcev

Risto Fotov

University Goce Delcev

Darko Lazarov

University Goce Delcev

Cane Koteski

University Goce Delcev

Date Written: October 2, 2011

Abstract

This paper revisits the Institutions and growth models. Econometric techniques have been applied on cross-country data, just to confirm the apriori knowledge that Institutions effect on growth is positive and highly statistically significant. This evidence was confirmed by all four models. OLS proved as a better technique for our data than 2SLS, this simply because overidentification test showed that instrument cannot be considered exogenous, also Hausman test showed that OLS is better than 2SLS at 1% and 5% levels of significance. G2SLS estimator and Fixed effects panel estimators just confirmed the results from the OLS and 2SLS. As a proxy variable for institutions we used rule of law variable, also as instruments were used revolutions and freedom house rating as well as war casualties variables. Also as conclusion here trade is insignificant in influence to GDP growth compared with quality of institutions.

Keywords: Institutions, Growth, 2SLS, OLS, G2SLS, Random effects, IV regression, Panel Fixed (within) IV regression, cross-country data, Hausman test, Overidentification test

JEL Classification: F33

Suggested Citation

Josheski, Dushko and Fotov, Risto and Lazarov, Darko and Koteski, Cane, Institutions and Growth Revisited: OLS, 2SLS, G2SLS Random Effects IV Regression and Panel Fixed (within) IV Regression with Cross-Country Data (October 2, 2011). Available at SSRN: https://ssrn.com/abstract=1937349 or http://dx.doi.org/10.2139/ssrn.1937349

Dushko Josheski (Contact Author)

University Goce Delcev ( email )

Stip
Macedonia
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+389 32 390 700 (Fax)

HOME PAGE: http://www.ugd.edu.mk/

Risto Fotov

University Goce Delcev ( email )

Stip
Macedonia

Darko Lazarov

University Goce Delcev ( email )

PO box 201
Stip, 2000
Macedonia
+389 550 317 (Phone)

Cane Koteski

University Goce Delcev ( email )

PO box 201
Stip, 2000
Macedonia

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