Does Investment Spur Growth Everywhere? Not Where Institutions are Weak

24 Pages Posted: 11 Oct 2014

See all articles by Thibaut Dort

Thibaut Dort

Université Libre de Bruxelles (ULB)

Pierre-Guillaume Meon

Université Libre de Bruxelles (ULB); Université Robert Schuman Strasbourg III

Khalid Sekkat

Université Libre de Bruxelles (ULB)

Date Written: November 2014

Abstract

We investigate the impact of investment on growth in a sample of 85 developed and developing countries over 1984–2009, conditioning the marginal effect of investment on institutional quality. The panel structure of our dataset allows controlling for unobserved heterogeneity and dealing with the risk of endogeneity bias. We find that investment increases growth more in countries with high institutional quality than in countries with defective institutions. The results are robust to estimating the model separately for developed and developing countries, for each continent, and over two sub‐periods. A jackknife experiment shows that they do not depend on any single country. The results are essentially driven by the quartiles of countries with the lowest and the highest institutional quality, and by the Government instability, Corruption, and Rule of law sub‐components of the ICRG index.

Suggested Citation

Dort, Thibaut and Meon, Pierre-Guillaume and Sekkat, Khalid, Does Investment Spur Growth Everywhere? Not Where Institutions are Weak (November 2014). Kyklos, Vol. 67, Issue 4, pp. 482-505, 2014, Available at SSRN: https://ssrn.com/abstract=2508492 or http://dx.doi.org/10.1111/kykl.12064

Thibaut Dort (Contact Author)

Université Libre de Bruxelles (ULB) ( email )

CP 132 Av FD Roosevelt 50
Brussels, Brussels 1050
Belgium

Pierre-Guillaume Meon

Université Libre de Bruxelles (ULB) ( email )

CP 132 Av FD Roosevelt 50
Brussels, Brussels 1050
Belgium

Université Robert Schuman Strasbourg III ( email )

47, Avenue de la Foret-Noire
Institut d'Etudes Politiques
67082 Strasbourg Cedex
France
33 3 88 41 77 21 (Phone)
33 3 88 41 77 78 (Fax)

Khalid Sekkat

Université Libre de Bruxelles (ULB) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

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