TRADE DYNAMICS AND BEYOND: EXPLORING THE INFLUENCE OF GOVERNMENT EFFICIENCY AND REGULATORY QUALITY ON ECONOMIC GROWTH
Creators: name: Philemon, Votsoma
name: Charles, Bita
name: Zara, Christy
Publisher: name: ZAP journals
Year: 2024
Subjects: Institutions
Economic Growth
Trade
Development
Corruption

description: The literature of the 1990s elevated institutions to a pivotal role, conducting analyses to underscore their crucial significance in economic development and the efficacy of economic policy measures. North (1990) pioneered this perspective by highlighting the vital role of institutions in economic development. Subsequent studies, such as Mauro (1995), delved into the detrimental impact of corruption on investment and economic growth in developing countries. Engerman and Sokoloff (2003) further posited the existence of economies of scale attributed to the quality of institutions and trade openness in shaping economic development. Additionally, Dollar and Kraay (2003) contended that nations with robust institutions tend to engage more in international trade. Notwithstanding, much of the existing literature explores the connections between institutions and trade while overlooking their impact on economic growth (Lavallée, 2006; Levchenko, 2013; Avom and Gandjon, 2014; Gandjon, 2017).

In the realm of economic literature during the 1990s, institutions emerged as focal points, garnering attention for their fundamental role in economic development. North (1990) laid the groundwork for this paradigm shift, elucidating the indispensable nature of institutions in fostering economic progress. Expanding on this discourse, Mauro (1995) delved into the corrosive effects of corruption on investment and economic growth, particularly in the context of developing countries. Engerman and Sokoloff (2003) advanced the discussion by proposing the existence of economies of scale resulting from the interplay of robust institutions and trade openness in influencing economic development. Dollar and Kraay (2003) further contributed to the narrative by asserting a positive correlation between strong institutions and increased participation in international trade.

Despite these noteworthy contributions, there remains a notable gap in the literature where the focus on institutions primarily centers on their relationship with trade, largely neglecting their impact on economic growth. This oversight is evident in studies by Lavallée (2006), Levchenko (2013), Avom and Gandjon (2014), and Gandjon (2017), which, while exploring the connection between institutions and trade dynamics, fall short in addressing their broader implications for economic growth.

This paper seeks to bridge this gap by reexamining the relationship between institutions and economic growth. By extending beyond the conventional examination of institutions solely in the context of trade, we aim to offer a more comprehensive understanding of their multifaceted influence on the overall economic development trajectory. The subsequent analysis will contribute to a nuanced comprehension of the intricate interplay between institutions, trade, and economic growth, fostering more informed policy discussions and strategic interventions.