Relationship between Institutions and Economic Growth: A Cross Country-Time Series Analysis

International Journal of Economics and Empirical Research, Vol. 4(7), p. 362-375, 2016

14 Pages Posted: 6 Dec 2016

See all articles by Nabia Tariq

Nabia Tariq

Lahore Leads University

Abdul Butt

Lahore Leads University

Hafiz Qasim

University of the Punjab (PU)

Date Written: December 3, 2016

Abstract

Purpose: Relationship between institutions and economic growth is remain a controversial phenomena in case of SAARC countries (South Asian Association for Regional Cooperation). This article, recommends that the policy makers of these countries should make and implement such type of ‘institutions’ that are helpful to improve the economic growth of these countries.

Methodology: The panel data on Gross Domestic Product index (GDPI), Institutional Index (Ins), Labour Force (LF), Educational Index (Edu), Gross Fixed Capital Formation (Pk), Trade Openness (TO) and Gross Domestic Product Deflator (Inf) have been utilized over the period of 1995-96 to 2012-13.

Findings: The results of ‘Fixed Effects Estimation’ (FEM) has been confirmed the positive and statistically significant relation between institutions and economic growth in case of all sample countries. On the basis of empirical results, it is found that efficient institutions lead to a firm policy mechanism that is what basically required for economic growth. It is concluded that institutions are related with the process of economic growth through different indicators.

Recommendations: Therefore, the selected countries should do more efforts to develop and maintain a quality of institutional setup which ultimately leads to an increase in economic growth.

Keywords: Institutions, Economic Growth, SAARC

JEL Classification: O4, O43

Suggested Citation

Tariq, Nabia and Butt, Abdul and Qasim, Hafiz, Relationship between Institutions and Economic Growth: A Cross Country-Time Series Analysis (December 3, 2016). International Journal of Economics and Empirical Research, Vol. 4(7), p. 362-375, 2016, Available at SSRN: https://ssrn.com/abstract=2879914

Nabia Tariq

Lahore Leads University ( email )

Lahore
Pakistan

Abdul Butt

Lahore Leads University ( email )

Lahore
Pakistan

Hafiz Qasim (Contact Author)

University of the Punjab (PU) ( email )

New Campus
Pakistan
Lahore, Punjab 54000
Pakistan

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