Institutions and Development in Developing Countries: An Empirical Assessment

in Perspectives on Global Development and Technology

Abstract

Based on data from the World Bank and the Global Competitiveness Report 2008-2009, this study uses a sample of 97 developing economies and finds that institutions do affect development, unlike results of the previous studies by Mc Arthur and Sachs (2001) and Sachs (2003). The observation is that the coefficient estimate of half of the explanatory variables does not have the anticipated sign due to severe multicollinearity among them. Regression results are more robust when interaction terms are included. This empirical examination may assist governments in those countries in identifying institutional areas that need to be improved upon in order to stimulate economic development.

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