Does Rule of Law Affect Economic Growth Positively?

Abstract

Efficient institutional structure resolves the uncertainties in the market and the problem of asymmetric information, and thus creates a positive exogeneity, ensures the efficient distribution of the resources and makes a positive impact on the functioning of the economy. In addition to this, especially rule of law forms the basis of the socioeconomic development. In the presence of the factors such as prevention of corruption and freedom of expression, institutional structure has a significant impact on economic growth. However, there are empirical studies that state that institutional efficiency boosts economic growth in developed countries, whereas it doesn't have an impact or has a negative impact on economic growth in developing countries. For all these reasons, the impact of institutional efficiency on economic growth in developed, developing and underdeveloped countries will be analyzed in this study. In this study, the effect of institutional effectiveness on economic growth has been analyzed in both three country groups from 2002 to 2015 by using GMM. Dependent variable is GDP and the independent variables are institutional variables (rule of law, fight against corruption, voice and accountability). Based on our primitive findings we expect that developed institutions effect economic growth positively in develop countries unlike developing countries.

Volatility in Discretionary Public Spending and Economic Growth: A Cross Country Analysis

“…The improvement in all these dimensions surely promotes economic growth. Similarly, rule of law and health expenditures also positively and significantly cause economic growth as observed in Ozpolat, Guven, Ozsoy, and Bahar (2016), and Piabuo and Tieguhong (2017) respectively. Similar to the effectiveness of government, the rule ranges from trust in rules of society, efficient contract enforcement, the efficiency of courts, property rights, and trust in the courts and police.…”

Asean Law And Economic Growth Asean

“…In essence, the rule of law aims to produce the basic pillars of an economy that is resilient to crises and can increase the rate of economic growth. Ozpolat et al (2016) and Roxas et al (2012) state that law enforcement has a positive and significant effect on economic growth.…”

“…A larger and more liquid securities market is contributing to economic growth. Ozpolat et al (2016) stated in their research that the rule of law index, the corruption control index, and the voting and accountability index are positively correlated with the GDP of high-income countries. Other studies, Roxas et al (2012) dan Sihag (2007), also convey the same thing, where according to him, the rule of law index has a significant positive effect on economic growth.…”

“…Voice and accountability variables are used as variables to measure democracy, the level of participation, and freedom of society in making policy decisions to be made by a country, because according to Stiglitz (2015), measuring welfare can also be done with indicators of democracy as an environmental instrument. Voice and accountability are also used based on an empirical study conducted by (Ozpolat et al, 2016). This research was conducted to analyze the effect of the legal influence that occurs in ASEAN on economic growth so that it can be used as a guide by the state in the law enforcement process to maintain the country's economic stability.…”

Serbia and economic implications of the rule of law

“…Економски раст и развој се могу привремено остварити и уз слабу/непостојећу владавину права, захваљујући социјалним структурама -породичне и пријатељске везе − које могу успоставити поверење независно од владавине права или захваљујући централизованом управљању (Bufford, 2006). Занимљиво је да налази емпиријских истраживања показују да је веза владавине права и економског раста снажнија у економски развијеним земљама него у земљама у развоју (Ozpolat, Guven, Ozsoy, Bahar, 2016).…”