The relationship between economic development and institutional environment ; Ekonomikos plėtros ir institucinės aplinkos tarpusavio ryšys

Abstract

The literature stresses the relation between institutions and economic performance. Series of studies have demonstrated a strong link between institutional environment (measured by property right, rule of law, corruption, bureaucratic quality and other institutional variables) and economic growth and development. What is unclear whether the institutions can also explain variation in per capita income across countries, in which institutional environment is to some degree alike. This article focuses on economic development in 1996–2006 in countries, grouped according to their institutional environment quality. This article aims to analyze to what extent variation in GDP per capita across these countries can be associated with institutional environment. Positive and strong relationship between GDP per capita and institutional environment variable proves out across 153 analyzed countries sample and in sub-sample of 60 countries where institutional environment in 1996–2006 on the average was "positive". But at best only weak relationship was established in sub-sample of 93 countries where institutional environment on the average was "negative".