Applying Panel Vector Autoregression to Institutions, Human Capital, and Output

Abstract

We apply System GMM and Panel Vector Autoregression (PVAR) to investigate the long run relationships between output, human capital, liberalized political institutions, and liberalized economic institutions. We find consistent evidence that economic institutions and human capital both greatly contribute to output. We also find, however, that political institutions typically have no discernable effect. We believe our methodology provides basis for the existence of causal relationships.

Keywords: Economic Growth, Political Institutions, Economic Institutions, Human Capital

JEL Classification: O43