Institutional Development, Transaction Costs and Economic Growth: Evidence from a Cross-Country Investigation

Journal of Institutional Economics, Vol. 12, Issue 1, pp. 129-159, 2015

Posted: 10 Oct 2017

See all articles by Mitja Kovac

Mitja Kovac

Faculty of Economics University of Ljubljana

Rok Spruk

University of Ljubljana - Faculty of Economics

Date Written: March 15, 2015

Abstract

This paper seeks to quantify the impact of transaction costs on cross-country economic growth. Our evidence from a cross-country panel data regression analysis reveals a persistent and robust negative effect of increasing transaction costs on the path of economic growth. The growth-enhancing effects of lower transaction costs are confirmed after controlling for the set of conditioning variables and further demonstrated in a cross-country growth model calibration. The results provide evidence that transaction costs might indeed be central to the study of cross-country productivity differences, suggest the importance of contractual relations and indicate their significant impact on cross-country economic performance over time.

Keywords: transaction costs, economic growth, new institutional economics

JEL Classification: C23, O43, O47, K12, K15

Suggested Citation

Kovac, Mitja and Spruk, Rok, Institutional Development, Transaction Costs and Economic Growth: Evidence from a Cross-Country Investigation (March 15, 2015). Journal of Institutional Economics, Vol. 12, Issue 1, pp. 129-159, 2015. Available at SSRN: https://ssrn.com/abstract=3050472

Mitja Kovac

Faculty of Economics University of Ljubljana ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Rok Spruk (Contact Author)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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