Spatial spillovers in the development of institutions
other
institutions
spatial-econometrics
Journal of Development Economics, 2013. With Harry H. Kelejian and Peter Murrell.
We examine spatial spillovers in institutional development, where the explanatory variable of interest is the level of institutions in bordering countries — a spatial lag of the dependent variable — using new results in spatial econometrics to address the missing-data problems that usually plague spatial empirical work. Spatial institutional spillovers are statistically significant and economically important; a counterfactual removing the USSR reveals large direct and indirect spillovers, a result that holds up across yearly cross-sections, fixed-effects estimates, and numerous additional robustness checks.
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We examine spatial spillovers in institutional development, where the explanatory variable of interest is the level of institutions in bordering countries — a spatial lag of the dependent variable — using new results in spatial econometrics to address the missing-data problems that usually plague spatial empirical work. Spatial institutional spillovers are statistically significant and economically important; a counterfactual removing the USSR reveals large direct and indirect spillovers, a result that holds up across yearly cross-sections, fixed-effects estimates, and numerous additional robustness checks.
Institutional quality in one country is not independent of institutional quality next door: reform and dysfunction both spread across borders. We develop a spatial econometric framework to estimate these cross-country spillovers directly, rather than treating each country’s institutions as determined purely by its own history and policy choices.
Published in: Journal of Development Economics, 101(C), 297–315