Institutional development, transaction costs and economic growth: evidence from a cross-country investigation
Keywords:
Transaction costs,
economic growth,
legal institutions,
new institutional economics.
Author(s):
Mitja Kovač, University of Ljubljana, Faculty of Economics, Slovenia
Rok Spruk, Department of economic and social history, Utrecht University, Utrecht, the Netherlands and University of Ljubljana, Faculty of Economics, Slovenia
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.
Journal:
Journal of Institutional Economics, Cambridge University Press, 2015
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