The link between institutions, technical change and macroeconomic volatility

This paper evaluates the role of technical change as a mediating channel through which the effects of institutions trickle down to affect growth volatility. Using different samples, estimation procedures and indicators of institutions and technical change, the results show that technical change is an important stabilizing force of growth volatility and that at least part of the stabilizing force of technical change originates from strong institutions. This conclusion does not appear to be generated by weak data, simultaneity bias or measurement errors and is remarkably robust to a large number of alternative specifications.