Economic growth and institutional quality in resource oriented countries (in Russian)
According to the Mehlum-Moene-Torvik model, the influence of institutions and natural resources on the level of GDP is ambiguous: depending on the value of a threshold function of institutional quality and natural resource endowment, the economy may be in one of the two equilibrium types - producer equilibrium or grabber equilibrium. In a grabber equilibrium, growth is negatively impacted by resource endowment and positively by institutions; in a producer equilibrium, more resources fosters economic growth, while institutions have no effect at all. Even though the empirical analysis supports the main result, the estimated specification does not fully correspond to the theoretical model. In this paper, we propose a different empirical testing strategy, more adequate to the Mehlum-Moene-Torvik model: the threshold function depends on both resources and institutions, and the regression specification more precisely reflects the influence of institutions and resources on the GDP growth rate. The econometric specification is a two-regime threshold regression, where a threshold value is also estimated. We show that the implications of the theoretical model are fully confirmed in the producer equilibrium, and only partly in the grabber equilibrium. We also discuss and compare various threshold and linear regression specifications.
When requesting a correction, please mention this item's handle: RePEc:qnt:quantl:y:2007:i:2:p:141-157. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stanislav Anatolyev)
If references are entirely missing, you can add them using this form.