Institutions and economic performance: A meta-regression analysis

This paper applies meta-regression analysis to the empirical literature that investigates the effect of institutions on economic performance. Although studies with growth-theoretic foundations do not yield robust evidence for an authentic empirical effect, we find more robust evidence of positive and large institutional effects on output levels. The partial correlations between institutional and economic performance variables are also influenced by model specification choices and, in particular, (non)treatment of the potential endogeneity of institutions. A corollary of such pronounced heterogeneities is that we cannot report a representative estimated effect size, although the evidence overwhelmingly suggests a positive influence of institutional quality on economic outcomes.

Research Highlights►The effect of institutions on economic performance is positive yet heterogeneous. ►The main source of heterogeneity is choice of dependent variable. ►Other sources: model specification; and approach to institutional endogeneity. ►Studies of output levels show more robust effects than do studies of output growth.