Do Institutions Matter More for Services?
World Bank, Development Research Group, Trade Team, 2006 - Economic development - 42 pages
Recent empirical research has focused on the role of institutions in overall economic performance. This paper examines the impact of institutions on the relative performance of the service sector. Through cross-country level and growth regressions it establishes the following stylized fact: countries with better institutions have relatively larger and more dynamic service sectors. It suggests that regulatory and contract enforcing institutions play a key role in the development of service sectors because these sectors enter into a more complex web of transactions with the rest of the economy and are more prone to market failure due to asymmetric information.
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Acemoglu additional controls asymmetric information average value base regression better institutions Blanchard and Kremer coefficient of Law column decadal change economic endogeneity problem English & French Ersado estimated coefficient estimated Law coefficient ethnolinguistic fractionalization exogenous variations Flewitt French legal origin GDP ratio German and Scandinavian growth regressions Hansen test statistics human capital impact of institutions institutional development LAC and Law LAC dummy Latitude Law variable legal origin countries legal system level regressions market failures measure of institutional null hypothesis omitted variable bias p-value panel of Table Porta quality of institutions regression results Research Working Paper robustness Rule of Law sample Scandinavian system countries separate regressions September 2006 September services to GDP shows the estimated significant at less Skill measure small Caribbean countries Socialist Law Socialist legal splintering stage regressions statistically significant suggest Summary statistics value of Law values in brackets variations in Law World Bank Yes Yes Yes