Institutions and Integration: Sources of Economic Growth?

Abstract

Economic theory provides several arguments as to why institutions and economic integration determine economic growth through their impact on the diffusion of technology. The empirical evidence for a joint impact of institutions and integration is ambiguous and depends on finding adequate instruments. Relying on internal instruments only this paper finds evidence for both institutions and integration simultaneously having a positive influence on growth. However the impact of institutions is limited to better performing developing countries only.

Keywords: Institution, Integration, Openness, Trade, Growth

JEL Classification: F11, F43, C23