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Institutional development, transaction costs and economic growth: evidence from a cross-country investigation

Published online by Cambridge University Press:  12 March 2015

MITJA KOVAČ  and
ROK SPRUK
MITJA KOVAČ*
Affiliation:
Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia
ROK SPRUK*
Affiliation:
Department of economic and social history, Utrecht University, Utrecht, the Netherlands
*
*Email: Mitja.kovac@ef.uni-lj.si
**Email: rok.spruk@uu.nl
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Abstract:

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.

Type
Research Article
Information
Journal of Institutional Economics , Volume 12 , Issue 1 , March 2016 , pp. 129 - 159
Copyright
Copyright © Millennium Economics Ltd 2015 

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