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The joint impact of infrastructure and institutions on economic growth

Published online by Cambridge University Press:  20 February 2020

Yitagesu Zewdu Zergawu ,
Yabibal M. Walle  and
José-Manuel Giménez-Gómez Open the ORCID record for José-Manuel Giménez-Gómez [Opens in a new window]
Yitagesu Zewdu Zergawu*
Affiliation:
Departament d'Economia and CREIP, Universitat Rovira i Virgili, Reus, Spain
Yabibal M. Walle
Affiliation:
Department of Economics, Georg-August-University of Goettingen, Goettingen, Germany
José-Manuel Giménez-Gómez
Affiliation:
Departament d'Economia and CREIP, Universitat Rovira i Virgili, Reus, Spain
*
*Corresponding author. Email: yitagesuzewdu.zergawu@urv.cat and yitez81@gmail.com
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Abstract

This paper examines the joint impact of infrastructure capital and institutional quality on economic growth using a large panel dataset covering 99 countries and spanning the years 1980–2015. The empirical strategy involves estimating a simple growth model where, in addition to standard controls, infrastructure, institutional quality, and their interaction are included as explanatory variables. Potential endogeneity concerns are addressed by employing generalized method of moments estimators that utilize internal instruments. We find that the interaction terms between infrastructure capital and institutional quality show a positive and significant impact on economic growth. These results are robust to a variety of alternative specifications and institutional quality measures. Hence, our results suggest that maximizing returns from infrastructure capital requires improving the quality of institutions.

Keywords

Dynamic panelgrowthinfrastructureinstitutions
Type
Research Article
Information
Journal of Institutional Economics , Volume 16 , Issue 4 , August 2020 , pp. 481 - 502
Copyright
Copyright © Millennium Economics Ltd 2020

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