The Effect of Government Effectiveness and Rule of Law on Economic Growth: The Case of European Union Transition Economies

Abstract

Government effectiveness can be effective on the country's economy through the political decision-making process and institutions. Legalization along with political decision-making process and institutions is also important for the countries. In a similar vein, the rule of law which is also important in terms of obeying the rules, may have effects on economy because of legal transactions. Therefore, it is important to analyse the impact of the government effectiveness and the rule of law on the economy. With this study, the effect of government effectiveness and rule of law on economic growth for European Union Transition Economies is investigated by using panel data method over the period of 2002-2018. According to the results, it is concluded that government effectiveness has positive effect on economic growth, but the rule of law has no statistically significant effect on economic growth. Moreover, the results indicate unidirectional causality runs from government effectiveness to economic growth and bidirectional causality from the rule of law and economic growth.

Corruption and growth in Sub Saharan African countries: Do differences in government effectiveness matter?

“…This implies that improving governance practices would increase the economic growth rate of countries in the SSA. This result supports those of Omoteso and Mobolaji (2014), Sacks and Levi (2010), Alam et al (2017), Güney (2017), Şaşmaz and Sağdiç (2020), and Spyromitros and Panagiotidis (2022), who found that 𝐺𝐸𝐸 has a negative effect of on economic growth. However, this finding contradicts those of Kurtz and Schrank (2007), Han et al (2014), Akinbode et al (2020), andFarooque et al (2021), who found a positive effect of 𝐺𝐸𝐸 on growth.…”

“…Akinbode et al (2020) analyze the effects of 𝐺𝐸𝐸 and corruption on human development in countries in SSA from 2005 to 2018 and show a positive impact of the 𝐺𝐸𝐸 on human development. Furthermore, Şaşmaz and Sağdiç (2020) analyze the relationship between 𝐺𝐸𝐸 and the rule of law on the economic growth of 11 "European Union Transition Economies" between 2002 and 2018 by using a panel data technique and show a positive effect of 𝐺𝐸𝐸 on the economic growth. Despite the increasing body of literature on the impacts of corruption on economic growth, the findings are varied and inconclusive.…”

The Effect of Institutional Quality on the Balance of Payments in African Countries. A Comparative Study

“…The study argued that an increase in fiscal transparency would improve government effectiveness and reduce government debt. The study of Şaşmaz and Sağdiç (2020) applied panel data models on 11 transition economies in the European Union for the period 2002-2018 to examine the effect of government effectiveness and the rule of law on the economic performance of these countries. The study argued that government effectiveness has a significant positive effect on economic growth, while the rule of law indicator has no significant effect on the process of economic growth.…”