Income Growth and Institutional Quality: Evidence from International Oil Price Shocks

43 Pages Posted: 4 Apr 2012

See all articles by Markus Brückner

Markus Brückner

affiliation not provided to SSRN

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: March 2012

Abstract

In this paper, we study the causal effect of income growth on institutional quality in the 1984-2007 cross country panel. To focus on exogenous income windfalls, we employ international oil price shocks as an instrument for income growth. While national incomes and measures of institutional quality are highly correlated, our analysis fails to identify a clear pattern of a causal effect, and estimations often yield statistically insignificant coefficients, albeit with positive signs. We then explore the possibility that fixed country characteristics may mediate the effect of income on institutions. Focusing on measures of ethnic heterogeneity, we find that ethnic polarization acts adversely as a mediating factor in this regard.

Keywords: Income growth, Institutional quality

JEL Classification: O11

Suggested Citation

Brückner, Markus and Gradstein, Mark, Income Growth and Institutional Quality: Evidence from International Oil Price Shocks (March 2012). CEPR Discussion Paper No. DP8871. Available at SSRN: https://ssrn.com/abstract=2034089

Markus Brückner (Contact Author)

affiliation not provided to SSRN

No Address Available

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+97 2 8647 2288 (Phone)
+97 2 8647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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