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Institutions, public debt and growth in Europe
Article | Year: 2017 | Pages: 159 - 205 | Volume: 41 | Issue: 2 Received: October 19, 2016 | Accepted: March 8, 2017 | Published online: June 15, 2017
|
FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
Note: As diamonds early EA countries (i.e. countries that joined the euro area until 2001), as x other EU countries. Source: ECB computation on EC data.
Note: Average of four indicators: government effectiveness, regulatory quality, rule of law and control of corruption. Dashed early EA countries and blank rest of EU.Source: Authors’ computation on WDI data.
Source: ECB computation on EC and World Bank data.
|
|
EU
|
Debt<601999
|
Debt>601999
|
Early EA
|
Transition countries
|
|
Pot.
GDP per capita PPPadj growth1999-2014
|
80.24
|
95.04
|
55.91
|
49.02
|
126.05
|
|
GDP per capita in thsd PPPadj EUR1999
|
15.65
|
14.15
|
18.72
|
20.49
|
8.81
|
|
WGI
Delivery1999
|
0.034
|
0.018
|
0.177
|
0.445
|
-0.624
|
|
WGI
Delivery2007
|
0.091
|
0.058
|
0.157
|
0.359
|
-0.427
|
|
WGI
Delivery2014
|
0.062
|
0.011
|
0.097
|
0.271
|
-0.376
|
|
Government
Debt % GDP1999
|
52.41
|
37.67
|
76.01
|
69.13
|
32.38
|
|
Observations1999
|
27
|
16
|
10
|
11
|
11
|
Source: ECB computation on EC and World Bank data.
|
15-year average per capita
potential growth
|
|
Explanatory
variables
|
OLS
|
2SLS
|
|
Log GDP
(PPP)
|
-0.589***
(0.0386)
|
-0.611***
(0.0413)
|
|
Institutional
delivery
|
0.0951***
(0.0317)
|
0.116***
(0.0394)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0357*
(0.0186)
|
|
(Debt>60)
x Institutional delivery
|
0.131***
(0.0283)
|
0.123***
(0.0289)
|
|
Constant
|
2.127***
(0.0988)
|
2.181***
(0.105)
|
|
Observations
|
208
|
208
|
|
R-squared
|
0.911
|
0.910
|
*** p<0.01, ** p<0.05, * p<0.1
Source: Authors’ computation on EC and World Bank data.
|
|
EU
(27)
|
EU + other OECD
(33)
|
Fixed ER
(21)
|
Flexible ER
(12)
|
|
Log GDP
(PPP)
|
-0.589***
(0.0386)
|
-0.551***
(0.0468)
|
-0.634***
(0.0483)
|
-0.402***
(0.0735)
|
|
Institutional
delivery
|
0.0951***
(0.0317)
|
0.0904**
(0.0391)
|
0.124**
(0.0465)
|
0.00785
(0.0765)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0716**
(0.0297)
|
-0.0507
(0.0322)
|
-0.0895
(0.0517)
|
|
(Debt>60)
x Institutional delivery
|
0.131***
(0.0283)
|
0.114***
(0.0413)
|
0.133***
(0.0425)
|
0.0873
(0.069)
|
|
Constant
|
2.127***
(0.0988)
|
2.032***
(0.118)
|
2.237***
(0.121)
|
1.657***
(0.186)
|
|
Observations
|
208
|
246
|
160
|
86
|
|
R-squared
|
0.911
|
0.849
|
0.880
|
0.834
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1 Other OECD: CA, IS, JP, NO, TR, US. Flexible ER: CZ, GB, HU, PL, RO, SE, CA, IS, JP, NO, TR, US. Fixed ER (early EA and fixed exchange rate and late EA joining countries): CY, EE, LT, LV, MT, SI, SK, BG, DK, HR.
|
|
15 year average potential GDP
growth (in PPP)
|
|
Debt
threshold
|
T=60
Baseline
|
T=50
|
T=70
|
No threshold debt centred at
60% for the interaction term
|
|
Log GDP
(PPP)
|
-0.589***
(0.0386)
|
-0.567***
(0.0413)
|
-0.600***
(0.0396)
|
-0.556***
(0.0412)
|
|
Institutional
delivery
|
0.0951***
(0.0317)
|
0.0663*
(0.0348)
|
0.122***
(0.0330)
|
0.153***
(0.0299)
|
|
(Debt>T)
|
-0.0394*
(0.0197)
|
-0.0670**
(0.0243)
|
-0.0272
(0.0249)
|
-0.000459
(0.000391)
|
|
(Debt>T)
x Institutional delivery
|
0.131***
(0.0283)
|
0.150***
(0.0291)
|
0.120***
(0.0348)
|
0.00291***
(0.000571)
|
|
Constant
|
2.127***
(0.0988)
|
2.080***
(0.103)
|
2.154***
(0.102)
|
2.013***
(0.105)
|
|
Observations
|
208
|
208
|
208
|
208
|
|
R-squared
|
0.911
|
0.926
|
0.900
|
0.917
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
Exercise 1 – Average annual growth impact of reducing debt to
below threshold (in %)
|
|
|
IT
|
SI
|
FR
|
PT
|
GR
|
|
Model
|
D50
|
D60
|
D70
|
D50
|
D60
|
D70
|
D50
|
D60
|
D70
|
D50
|
D60
|
D70
|
D50
|
D60
|
D70
|
|
Contribution debt
|
0.46
|
0.27
|
0.18
|
0
|
0
|
0
|
0.46
|
0.27
|
0
|
0.46
|
0
|
0
|
0.46
|
0.27
|
0.18
|
|
Contribution interaction term
|
0.27
|
0.24
|
0.22
|
0
|
0
|
0
|
-0.3
|
-0.3
|
0
|
-0.1
|
0
|
0
|
0.24
|
0.21
|
0.19
|
|
Total
|
0.75
|
0.51
|
0.41
|
0
|
0
|
0
|
0.14
|
0
|
0
|
0.32
|
0
|
0
|
0.72
|
0.49
|
0.38
|
|
Exercise 2 – Average annual growth impact of reducing debt to
below threshold and moving institutions to EU top 3 (in %)
|
|
|
IT
|
SI
|
FR
|
PT
|
GR
|
|
Contribution institutional delivery
|
0.87
|
0.73
|
0.47
|
0.59
|
0.85
|
|
Contribution debt
|
0.27
|
0
|
0.27
|
0
|
0.27
|
|
Contribution interaction term
|
0.24
|
0
|
-0.3
|
0
|
0.21
|
|
Total
|
1.45
|
0.73
|
0.47
|
0.59
|
1.4
|
|
|
15 year average potential GDP
growth (in PPP)
|
|
|
Baseline
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|
Catching-up
|
-0.589***
(0.0386)
|
-0.588***
(0.0395)
|
-0.588***
(0.0386)
|
-0.559***
(0.0453)
|
-0.586***
(0.0365)
|
-0.551***
(0.0397)
|
-0.550***
(0.0537)
|
|
Institutional
delivery
|
0.0951***
(0.0317)
|
0.0969***
(0.0317)
|
0.102***
(0.0354)
|
0.0736**
(0.0308)
|
0.0885***
(0.0301)
|
0.0763**
(0.0297)
|
0.0718**
(0.0341)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0346*
(0.0182)
|
-0.0319
(0.0212)
|
-0.0486**
(0.0215)
|
-0.0301
(0.023)
|
-0.0383
(0.0271)
|
-0.00518
(0.0233)
|
|
(Debt>60)
x Institutional delivery
|
0.131***
(0.0283)
|
0.123***
(0.0266)
|
0.138***
(0.0285)
|
0.134***
(0.0248)
|
0.124***
(0.0286)
|
0.128***
(0.0364)
|
0.0799***
(0.0266)
|
|
Trade
openness
|
|
0.035
(0.0385)
|
|
0.0355
(0.035)
|
|
Government
expenditure
|
|
-0.0985
(0.124)
|
|
-0.102
(0.116)
|
|
Savings
rate
|
|
-0.00161
(0.00176)
|
|
0.00227
(0.00264)
|
|
Participation
rate
|
|
0.00193
(0.00235)
|
|
0.00374
(0.00274)
|
|
Education
|
|
0.00114
(0.00079)
|
0.00157*
(0.00077)
|
|
Constant
|
2.127***
(0.0988)
|
1.969***
(0.214)
|
2.039***
(0.157)
|
2.069***
(0.106)
|
1.980***
(0.189)
|
2.030***
(0.102)
|
1.491***
(0.29)
|
|
Observations
|
208
|
208
|
208
|
195
|
208
|
173
|
166
|
|
R-squared
|
0.911
|
0.914
|
0.914
|
0.925
|
0.912
|
0.897
|
0.922
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
15 year average potential GDP
growth (in PPP)
|
|
Institutions
|
Baseline
|
ECI
(1)
|
KAOPEN
(2)
|
EFF
(3)
|
EFH
(4)
|
|
Catching-up
|
-0.589***
(0.0386)
|
-0.522***
(0.0179)
|
-0.538***
(0.0161)
|
-0.596***
(0.0255)
|
-0.519***
(0.0264)
|
|
Institutions
|
0.0951***
(0.0317)
|
0.0676**
(0.0321)
|
0.0371***
(0.0102)
|
0.0757***
(0.0218)
|
0.00445*
(0.00238)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
0.0230
(0.0326)
|
0.0303
(0.0312)
|
0.0226
(0.0239)
|
0.00215
(0.0248)
|
|
(Debt>60)
x Institutions
|
0.131***
(0.0283)
|
0.0535
(0.0389)
|
-0.00929
(0.0191)
|
0.0522**
(0.0206)
|
0.0108***
(0.00277)
|
|
Constant
|
2.127***
(0.0988)
|
1.941***
(0.0448)
|
2.000***
(0.0467)
|
2.139***
(0.0664)
|
1.941***
(0.0694)
|
|
Observations
|
208
|
454
|
458
|
470
|
200
|
|
First
observation
|
1995
|
1975
|
1975
|
1975
|
1995
|
|
R-squared
|
0.911
|
0.873
|
0.865
|
0.882
|
0.883
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average per capita
GDP growth
|
|
|
Baseline
|
Actual
PPP Log
(1)
|
Actual
Real Log
(2)
|
IMF Pot
Real Log
(3)
|
EC Pot PPP
RelEU
(4)
|
|
PPP Log
|
-0.589***
(0.0386)
|
-0.597***
(0.0441)
|
|
|
Real Log
|
|
|
-0.403***
(0.0499)
|
-0.373***
(0.0398)
|
|
|
PPP RelEU
|
|
|
|
|
-0.469***
(0.0509)
|
|
Institutions
|
0.0951***
(0.0317)
|
0.0909**
(0.0359)
|
0.146**
(0.0533)
|
0.148***
(0.0455)
|
6.432**
(2.455)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0540*
(0.0271)
|
-0.0401
(0.0298)
|
-0.0401
(0.0269)
|
-3.208
(2.002)
|
|
(Debt>60)
x Institutions
|
0.131***
(0.0283)
|
0.150***
(0.0384)
|
0.161***
(0.0400)
|
0.144***
(0.0327)
|
11.63***
(3.237)
|
|
Constant
|
2.127***
(0.0988)
|
2.134***
(0.113)
|
1.374***
(0.131)
|
1.296***
(0.101)
|
46.05***
(4.024)
|
|
Observations
|
208
|
208
|
208
|
184
|
208
|
|
R-squared
|
0.911
|
0.896
|
0.799
|
0.766
|
0.776
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
Base
Span
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
1
|
30
|
26
|
43
|
15
|
56
|
49
|
56
|
52
|
62
|
61
|
77
|
58
|
45
|
31
|
41
|
47
|
24
|
31
|
48
|
1
|
|
2
|
26
|
32
|
28
|
39
|
57
|
64
|
64
|
70
|
68
|
76
|
75
|
73
|
49
|
43
|
56
|
45
|
31
|
46
|
49
|
2
|
|
3
|
39
|
33
|
38
|
49
|
68
|
68
|
74
|
73
|
77
|
76
|
81
|
69
|
52
|
51
|
52
|
47
|
42
|
50
|
50
|
3
|
|
4
|
39
|
43
|
50
|
62
|
72
|
75
|
76
|
78
|
79
|
82
|
77
|
69
|
57
|
53
|
51
|
52
|
46
|
52
|
|
4
|
|
5
|
46
|
55
|
62
|
70
|
79
|
77
|
81
|
81
|
85
|
80
|
77
|
71
|
57
|
54
|
55
|
54
|
48
|
|
|
5
|
|
6
|
57
|
63
|
69
|
77
|
81
|
82
|
83
|
86
|
83
|
80
|
78
|
71
|
58
|
58
|
56
|
55
|
|
|
|
6
|
|
7
|
64
|
68
|
76
|
79
|
85
|
85
|
88
|
85
|
83
|
82
|
78
|
71
|
59
|
60
|
57
|
|
|
|
|
7
|
|
8
|
69
|
74
|
78
|
83
|
88
|
90
|
88
|
85
|
84
|
82
|
78
|
70
|
60
|
61
|
|
|
|
|
|
8
|
|
9
|
73
|
78
|
82
|
87
|
92
|
90
|
87
|
85
|
84
|
82
|
77
|
69
|
60
|
|
|
|
|
|
|
9
|
|
10
|
77
|
83
|
87
|
92
|
93
|
89
|
88
|
86
|
85
|
82
|
76
|
68
|
|
|
|
|
|
|
|
10
|
|
11
|
82
|
88
|
92
|
92
|
92
|
90
|
88
|
86
|
84
|
81
|
75
|
|
|
|
|
|
|
|
|
11
|
|
12
|
88
|
92
|
92
|
92
|
92
|
90
|
88
|
86
|
84
|
80
|
|
|
|
|
|
|
|
|
|
12
|
|
13
|
92
|
93
|
92
|
92
|
93
|
90
|
87
|
85
|
83
|
|
|
|
|
|
|
|
|
|
|
13
|
|
14
|
93
|
93
|
92
|
92
|
92
|
89
|
87
|
84
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
15
|
94
|
94
|
93
|
92
|
92
|
88
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
16
|
94
|
94
|
92
|
91
|
91
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
17
|
94
|
93
|
91
|
90
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
18
|
94
|
93
|
90
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
19
|
93
|
92
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
20
|
93
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
|
Average potential per capita GDP growth (in
PPP)
|
|
Outcome
|
Baseline
|
15yr starting 1996/1999/2002
|
23yr starting
1995
|
10yr
non-overlapping
|
|
Catching-up
|
-0.589***
(0.0386)
|
-0.572***
(0.0430)
|
-0.705***
(0.0637)
|
-0.471***
(0.0378)
|
|
Institutions
|
0.0951***
(0.0317)
|
0.0892**
(0.0359)
|
0.0965*
(0.04838)
|
0.127***
(0.0304)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0549**
(0.0239)
|
-0.0153
(0.0380)
|
-0.00512
(0.0226)
|
|
(Debt>60) x
Institutions
|
0.131***
(0.0283)
|
0.151***
(0.0354)
|
0.202***
(0.0483)
|
0.0809*
(0.0430)
|
|
Constant
|
2.127***
(0.0988)
|
2.080***
(0.108)
|
2.505***
(0.152)
|
1.674***
(0.101)
|
|
Observations
|
208
|
78
|
25
|
52
|
|
R-squared
|
0.911
|
0.904
|
0.936
|
0.843
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
Average potential per capita GDP growth (in
PPP)
|
|
Outcome
|
23yr starting 1995
(Institutional delivery)
|
23yr starting 1995
(EFI)
|
35yr starting in 1983
(EFI)
|
|
Catching-up
|
-0.705***
(0.0637)
|
-0.664***
(0.0514)
|
-0.738***
(0.2122)
|
|
Institutions
|
0.0965*
(0.0484)
|
0.0318
(0.0233)
|
0.165***
(0.0473)
|
|
(Debt>60)
|
-0.0153
(0.0380)
|
-0.0155
(0.0402)
|
0.0438
(0.0896)
|
|
(Debt>60) x
Institutions
|
0.202***
(0.0483)
|
0.197***
(0.037)
|
-0.0847
(0.0862)
|
|
Constant
|
2.505***
(0.152)
|
2.423***
(0.135)
|
2.662***
(0.4835)
|
|
Observations
|
25
|
25
|
13
|
|
R-squared
|
0.936
|
0.943
|
0.768
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
Explanatory
variables
|
Institutions
|
(Debt>60) x
Institutions
|
Institutions
|
(Debt>60) x
Institutions
|
|
(Origin=English)
|
Omitted
|
Omitted
|
Omitted
|
Omitted
|
|
(Debt>60) x
(Origin=English)
|
Omitted
|
Omitted
|
Omitted
|
Omitted
|
|
(Origin=French)
|
-0.127
(0.0809)
|
0.0200
(0.0626)
|
-0.127
(0.165)
|
0.0200
(0.0248)
|
|
(Origin=Soviet)
|
-0.414***
(0.0895)
|
0.115*
(0.0693)
|
-0.414**
(0.190)
|
0.115
(0.0781)
|
|
(Origin=German)
|
0.0689
(0.115)
|
-0.00983
(0.0893)
|
0.0689
(0.143)
|
-0.00983
(0.0153)
|
|
(Origin=Scandinavian)
|
0.332***
(0.0900)
|
-0.0151
(0.0697)
|
0.332*
(0.163)
|
-0.0151
(0.0199)
|
|
(Debt>60)
|
0.0384
(0.144)
|
0.521***
(0.112)
|
0.0384
(0.194)
|
0.521***
(0.157)
|
|
(Debt>60) x
(Origin=French)
|
-0.289*
(0.160)
|
-0.392***
(0.124)
|
-0.289
(0.238)
|
-0.392*
(0.224)
|
|
(Debt>60) x
(Origin=Soviet)
|
-0.0295
(0.171)
|
-1.214***
(0.133)
|
-0.0295
(0.296)
|
-1.214***
(0.360)
|
|
(Debt>60) x
(Origin=German)
|
-0.00134
(0.196)
|
0.253*
(0.152)
|
-0.00134
(0.194)
|
0.253
(0.158)
|
|
(Debt>60) x
(Origin=Scandinavian)
|
-0.0884
(0.181)
|
0.374***
(0.141)
|
-0.0884
(0.212)
|
0.374**
(0.165)
|
|
Catching-up
|
0.782***
(0.0694)
|
0.133**
(0.0537)
|
0.782***
(0.155)
|
0.133
(0.0867)
|
|
Constant
|
-1.782***
(0.216)
|
-0.401**
(0.168)
|
-1.782***
(0.487)
|
-0.401
(0.261)
|
|
Observations
|
208
|
208
|
208
|
208
|
|
R-squared
|
0.843
|
0.691
|
0.843
|
0.691
|
|
Clustered
standard errors
|
NO
|
NO
|
YES
|
YES
|
|
F-stat of
excluded instruments
|
14.41
|
37.86
|
5.354
|
9.282
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
EU
(27)
|
EU + other OECD
(33)
|
Fixed ER
(21)
|
Flexible ER
(12)
|
|
Log GDP (PPP)
|
-0.611***
(0.0413)
|
-0.624***
(0.0654)
|
-0.567***
(0.0560)
|
-0.568***
(0.0810)
|
|
Institutions
|
0.116***
(0.0394)
|
0.159**
(0.0784)
|
0.0626
(0.0508)
|
0.163*
(0.0866)
|
|
(Debt>60)
|
-0.0357*
(0.0186)
|
-0.0612**
(0.0252)
|
-0.0611*
(0.0321)
|
-0.0693*
(0.0383)
|
|
(Debt>60) x
Institutions
|
0.123***
(0.0289)
|
0.106**
(0.0499)
|
0.131***
(0.0386)
|
0.0371
(0.0706)
|
|
Constant
|
2.181***
(0.105)
|
2.219***
(0.173)
|
2.067***
(0.137)
|
2.087***
(0.238)
|
|
Observations
|
208
|
246
|
160
|
86
|
|
R-squared
|
0.910
|
0.842
|
0.874
|
0.803
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1 Other OECD: CA, IS, JP, NO, TR, US. Flexible ER: CZ, GB, HU, PL, RO, SE, CA, IS, JP, NO, TR, US. Fixed ER (early EA and fixed exchange rate and late EA joining countries): CY, EE, LT, LV, MT, SI, SK, BG, DK, HR.
|
|
15 year average potential GDP growth (in PPP)
|
|
Debt threshold
|
T=60
Baseline
|
T=50
|
T=70
|
No threshold debt
centred at 60% for the interaction term
|
|
Log GDP (PPP)
|
-0.611***
(0.0413)
|
-0.590***
(0.0494)
|
-0.633***
(0.0422)
|
-0.556***
(0.0499)
|
|
Institutions
|
0.116***
(0.0394)
|
0.0932*
(0.0503)
|
0.151***
(0.0386)
|
0.157***
(0.0366)
|
|
(Debt>T)
|
-0.0357*
(0.0186)
|
-0.0641***
(0.0235)
|
-0.0175
(0.0252)
|
-0.000419
(0.000475)
|
|
(Debt>T) x
Institutions
|
0.123***
(0.0289)
|
0.133***
(0.0363)
|
0.120***
(0.0393)
|
0.00316***
(0.00111)
|
|
Constant
|
2.181***
(0.105)
|
2.140***
(0.123)
|
2.238***
(0.108)
|
2.012***
(0.129)
|
|
Observations
|
208
|
208
|
208
|
208
|
|
R-squared
|
0.910
|
0.925
|
0.899
|
0.917
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Catching-up
|
-0.611***
(0.0413)
|
-0.617***
(0.0434)
|
-0.602***
(0.0438)
|
-0.561***
(0.0568)
|
-0.591***
(0.0505)
|
-0.570***
(0.0544)
|
-0.594***
(0.0640)
|
|
Institutions
|
0.116***
(0.0394)
|
0.123***
(0.0408)
|
0.117**
(0.0531)
|
0.0775*
(0.0430)
|
0.0954*
(0.0540)
|
0.0970**
(0.0440)
|
0.116*
(0.0636)
|
|
(Debt>60)
|
-0.0357*
(0.0186)
|
-0.0315*
(0.0182)
|
-0.0285
(0.0212)
|
-0.0462**
(0.0198)
|
-0.0277
(0.0208)
|
-0.0265
(0.0239)
|
-0.000569
(0.0232)
|
|
(Debt>60) x
Institutions
|
0.123***
(0.0289)
|
0.122***
(0.0298)
|
0.129***
(0.0265)
|
0.120***
(0.0245)
|
0.115***
(0.0287)
|
0.0988***
(0.0331)
|
0.0817***
(0.0290)
|
|
Trade openness
|
|
0.0342
(0.0370)
|
|
|
|
|
0.0304
(0.0330)
|
|
Government
expenditure
|
|
|
-0.101
(0.135)
|
|
|
|
-0.135
(0.140)
|
|
Savings rate
|
|
|
|
-0.00151
(0.00174)
|
|
|
0.00216
(0.00242)
|
|
Participation rate
|
|
|
|
|
0.00198
(0.00291)
|
|
0.00253
(0.00318)
|
|
Education
|
|
|
|
|
|
0.00127
(0.000785)
|
0.00162**
(0.000710)
|
|
Constant
|
2.181***
(0.105)
|
2.046***
(0.182)
|
2.072***
(0.115)
|
2.071***
(0.132)
|
1.991***
(0.311)
|
2.077***
(0.141)
|
1.687***
(0.228)
|
|
Observations
|
208
|
208
|
208
|
195
|
208
|
173
|
166
|
|
R-squared
|
0.910
|
0.913
|
0.913
|
0.925
|
0.912
|
0.896
|
0.919
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Institutions
|
WGI
Baseline
|
Economic
Complexity
|
Chinn-Ito
Openness
|
Economic Freedom
Fraser
|
Economic Freedom
Heritage
|
|
Catching-up
|
-0.611***
(0.0413)
|
-0.559***
(0.0306)
|
-0.690***
(0.0776)
|
-0.773***
(0.0870)
|
-0.516***
(0.0794)
|
|
Institutions
|
0.116***
(0.0394)
|
0.134***
(0.0464)
|
0.144***
(0.0487)
|
0.202**
(0.0848)
|
0.00375
(0.00889)
|
|
(Debt>60)
|
-0.0357*
(0.0186)
|
0.0235
(0.0428)
|
0.0358
(0.0292)
|
0.0189
(0.0298)
|
0.000462
(0.0459)
|
|
(Debt>60) x
Institutions
|
0.123***
(0.0289)
|
0.0875
(0.0697)
|
-0.0569
(0.0682)
|
0.115**
(0.0501)
|
0.0122***
(0.00308)
|
|
Constant
|
2.181***
(0.105)
|
2.019***
(0.0696)
|
2.399***
(0.200)
|
2.582***
(0.227)
|
1.934***
(0.194)
|
|
Observations
|
208
|
454
|
458
|
470
|
200
|
|
First
observation
|
1995
|
1975
|
1975
|
1975
|
1995
|
|
R-squared
|
0.910
|
0.855
|
0.716
|
0.803
|
0.883
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Variables
|
EU27
(baseline)
|
EU27
(excl. GR)
|
EU (15)
|
EU (15)
(excl. GR)
|
CEECs (10)
|
|
Catching-up
|
-0.589***
(0.0386)
|
-0.573***
(0.0350)
|
-0.407***
(0.0422)
|
-0.398***
(0.0426)
|
-0.634***
(0.0712)
|
|
Institutions
|
0.0951***
(0.0317)
|
0.0833***
(0.0288)
|
0.0671**
(0.0271)
|
0.0629**
(0.0262)
|
0.0722
(0.0777)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0294*
(0.0164)
|
-0.0519**
(0.0228)
|
-0.0342
(0.0194)
|
-0.120**
(0.0436)
|
|
(Debt>60) x
Institutions
|
0.131***
(0.0283)
|
0.120***
(0.0231)
|
0.142***
(0.0359)
|
0.117***
(0.0335)
|
0.0626
(0.0504)
|
|
Constant
|
2.127***
(0.0988)
|
2.085***
(0.0897)
|
1.605***
(0.124)
|
1.579***
(0.126)
|
2.210***
(0.192)
|
|
Observations
|
208
|
200
|
120
|
112
|
80
|
|
R-squared
|
0.911
|
0.914
|
0.659
|
0.675
|
0.862
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Variables
|
EU27
(baseline)
|
EU27
(excl. GR)
|
EU (15)
|
EU (15)
(excl. GR)
|
|
Catching-up
|
-0.611***
(0.0413)
|
-0.596***
(0.0399)
|
-0.415***
(0.0513)
|
-0.413***
(0.0541)
|
|
Institutions
|
0.116***
(0.0394)
|
0.104***
(0.0374)
|
0.0787**
(0.0394)
|
0.0787**
(0.0401)
|
|
(Debt>60)
|
-0.0357*
(0.0186)
|
-0.0284
(0.0173)
|
-0.0419*
(0.0220)
|
-0.0172
(0.0218)
|
|
(Debt>60) x
Institutions
|
0.123***
(0.0289)
|
0.122***
(0.0293)
|
0.122***
(0.0362)
|
0.0868**
(0.0366)
|
|
Constant
|
2.181***
(0.105)
|
2.145***
(0.100)
|
1.621***
(0.148)
|
1.615***
(0.156)
|
|
Observations
|
208
|
200
|
120
|
112
|
|
R-squared
|
0.910
|
0.913
|
0.657
|
0.672
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Catching-up
|
-0.522***
(0.0179)
|
-0.539***
(0.0172)
|
-0.484***
(0.0281)
|
-0.484***
(0.0228)
|
-0.507***
(0.0310)
|
-0.468***
(0.0345)
|
-0.488***
(0.0304)
|
|
Institutions
|
0.0676**
(0.0321)
|
0.0923***
(0.0227)
|
0.0254
(0.0373)
|
0.00484
(0.0282)
|
0.0113
(0.0308)
|
0.00737
(0.0292)
|
0.0262
(0.0323)
|
|
(Debt>60)
|
0.0230
(0.0326)
|
0.0133
(0.0283)
|
-0.00750
(0.0364)
|
-0.0412
(0.0241)
|
-0.0225
(0.0275)
|
-0.0130
(0.0196)
|
0.00696
(0.0204)
|
|
(Debt>60) x
Institutions
|
0.0535
(0.0389)
|
0.0136
(0.0432)
|
0.103***
(0.0355)
|
0.129***
(0.0284)
|
0.107**
(0.0394)
|
0.0955***
(0.0246)
|
0.0610**
(0.0279)
|
|
Trade openness
|
0.123***
(0.0334)
|
|
|
|
|
|
0.0658**
(0.0284)
|
|
Government
expenditure
|
-0.135
(0.131)
|
|
|
|
|
|
-0.128
(0.113)
|
|
Savings rate
|
-0.00126
(0.00179)
|
|
|
|
|
|
0.00234
(0.00257)
|
|
Participation
rate
|
0.00294*
(0.00147)
|
|
|
|
|
|
0.00639***
(0.00198)
|
|
Education
|
0.00126
(0.000925)
|
|
|
|
|
|
0.00124
(0.000847)
|
|
Constant
|
1.941***
(0.0448)
|
1.469***
(0.130)
|
1.749***
(0.125)
|
1.882***
(0.0556)
|
1.715***
(0.0906)
|
1.821***
(0.0927)
|
0.995***
(0.194)
|
|
Observations
|
454
|
454
|
270
|
311
|
307
|
200
|
183
|
|
R-squared
|
0.873
|
0.901
|
0.866
|
0.900
|
0.896
|
0.840
|
0.925
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Catching-up
|
-0.538***
(0.0161)
|
-0.546***
(0.0175)
|
-0.503***
(0.0245)
|
-0.515***
(0.0248)
|
-0.532***
(0.0220)
|
-0.488***
(0.0262)
|
-0.530***
(0.0444)
|
|
Institutions
|
0.0371***
(0.0102)
|
0.0353***
(0.00996)
|
0.0254**
(0.00915)
|
0.0241***
(0.00861)
|
0.0154
(0.00946)
|
0.0241**
(0.00959)
|
0.0276***
(0.00956)
|
|
(Debt>60)
|
0.0303
(0.0312)
|
0.0205
(0.0254)
|
-0.00282
(0.0345)
|
-0.0181
(0.0246)
|
0.00283
(0.0213)
|
0.00279
(0.0244)
|
-0.000956
(0.0197)
|
|
(Debt>60) x
Institutions
|
-0.00929
(0.0191)
|
-0.00528
(0.0170)
|
0.00941
(0.0148)
|
0.0216
(0.0166)
|
0.0293**
(0.0129)
|
0.00408
(0.0154)
|
0.0147
(0.0145)
|
|
Trade openness
|
|
0.0680**
(0.0322)
|
|
|
|
|
0.0639**
(0.0286)
|
|
Government
expenditure
|
-
|
|
0.0435
(0.0879)
|
|
|
|
-0.0256
(0.0901)
|
|
Savings rate
|
|
|
|
0.000670
(0.00168)
|
|
|
0.00402
(0.00296)
|
|
Participation
rate
|
|
|
|
|
0.00313**
(0.00145)
|
|
0.00663**
(0.00259)
|
|
Education
|
|
|
|
|
|
0.00161**
(0.000698)
|
0.00175*
(0.000903)
|
|
Constant
|
2.000***
(0.0467)
|
1.735***
(0.140)
|
1.869***
(0.114)
|
1.935***
(0.0565)
|
1.764***
(0.0997)
|
1.864***
(0.0715)
|
1.155***
(0.229)
|
|
Observations
|
458
|
458
|
280
|
307
|
316
|
207
|
187
|
|
R-squared
|
0.865
|
0.875
|
0.842
|
0.885
|
0.889
|
0.826
|
0.920
|
*** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP growth (in PPP)
|
|
Catching-up
|
-0.596***
(0.0255)
|
-0.589***
(0.0230)
|
-0.576***
(0.0273)
|
-0.565***
(0.0324)
|
-0.573***
(0.0241)
|
-0.549***
(0.0349)
|
-0.560***
(0.0623)
|
|
Institutions
|
0.0757***
(0.0218)
|
0.0681***
(0.0176)
|
0.0555***
(0.0195)
|
0.0468***
(0.0162)
|
0.0378*
(0.0191)
|
0.0581**
(0.0268)
|
0.0497*
(0.0244)
|
|
(Debt>60)
|
0.0226
(0.0239)
|
0.0172
(0.0218)
|
-0.0188
(0.0180)
|
-0.0189
(0.0186)
|
-0.00253
(0.0169)
|
-0.0307
(0.0182)
|
-0.00529
(0.0219)
|
|
(Debt>60) x
Institutions
|
0.0522**
(0.0206)
|
0.0465*
(0.0241)
|
0.104***
(0.0178)
|
0.0707**
(0.0271)
|
0.0808***
(0.0234)
|
0.104***
(0.0277)
|
0.0475*
(0.0273)
|
|
Trade openness
|
|
0.0410
(0.0317)
|
|
|
|
|
0.0444
(0.0330)
|
|
Government
expenditure
|
-
|
|
-0.0290
(0.0777)
|
|
|
|
0.00126
(0.102)
|
|
Savings rate
|
|
|
|
0.00103
(0.00169)
|
|
|
0.00392
(0.00281)
|
|
Participation
rate
|
|
|
|
|
0.00306**
(0.00146)
|
|
0.00652**
(0.00265)
|
|
Education
|
|
|
|
|
|
0.00128*
(0.000692)
|
0.00154
(0.000968)
|
|
Constant
|
2.139***
(0.0664)
|
1.951***
(0.136)
|
2.062***
(0.0898)
|
2.057***
(0.0722)
|
1.868***
(0.113)
|
2.017***
(0.0941)
|
1.343***
(0.285)
|
|
Observations
|
470
|
470
|
286
|
319
|
323
|
207
|
187
|
|
R-squared
|
0.882
|
0.886
|
0.881
|
0.903
|
0.904
|
0.867
|
0.916
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15 year average potential GDP
growth (in PPP)
|
|
Catching-up
|
-0.519***
(0.0264)
|
-0.513***
(0.0276)
|
-0.537***
(0.0306)
|
-0.496***
(0.0296)
|
-0.527***
(0.0224)
|
-0.489***
(0.0250)
|
-0.520***
(0.0513)
|
|
Institutions
|
0.00445*
(0.00238)
|
0.00401*
(0.00226)
|
0.00542**
(0.00212)
|
0.00276
(0.00212)
|
0.00409
(0.00247)
|
0.00410
(0.00275)
|
0.00344
(0.00229)
|
|
(Debt>60)
|
0.00215
(0.0248)
|
0.00259
(0.0234)
|
-0.00067
(0.0260)
|
-0.0135
(0.0281)
|
0.0220
(0.0211)
|
0.00771
(0.0230)
|
0.0219
(0.0209)
|
|
(Debt>60)
x Institutions
|
0.0108***
(0.00277)
|
0.0104***
(0.00245)
|
0.0102***
(0.00320)
|
0.0102***
(0.00290)
|
0.01000***
(0.00245)
|
0.0106***
(0.00376)
|
0.00303
(0.00315)
|
|
Trade
openness
|
|
0.0313
(0.0370)
|
|
|
|
|
0.0493
(0.0376)
|
|
Government
expenditure
|
-
|
|
0.0915
(0.131)
|
|
|
|
0.0353
(0.137)
|
|
Savings
rate
|
|
|
|
-0.00132
(0.00215)
|
|
|
0.00322
(0.00295)
|
|
Participation
rate
|
|
|
|
|
0.00469**
(0.00201)
|
|
0.00719***
(0.00249)
|
|
Education
|
|
|
|
|
|
0.00171***
(0.000603)
|
0.00145
(0.000910)
|
|
Constant
|
1.941***
(0.0694)
|
1.786***
(0.185)
|
2.062***
(0.167)
|
1.900***
(0.0706)
|
1.625***
(0.160)
|
1.860***
(0.0698)
|
1.205***
(0.286)
|
|
Observations
|
200
|
200
|
200
|
187
|
200
|
170
|
163
|
|
R-squared
|
0.883
|
0.886
|
0.885
|
0.896
|
0.893
|
0.875
|
0.909
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
Base
Span
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
1
|
-2.9
|
-2.1
|
-2.7
|
-1.1
|
0.0
|
-3.4
|
-1.7
|
-1.9
|
-3.1
|
-2.2
|
-3.1
|
-3.3
|
-2.9
|
-2.3
|
-1.3
|
-1.4
|
-1.7
|
0.1
|
-1.0
|
1
|
|
2
|
-2.6
|
-2.9
|
-2.5
|
-0.7
|
-2.0
|
-4.0
|
-2.3
|
-2.8
|
-3.3
|
-3.0
|
-3.9
|
-5.0
|
-3.2
|
-2.5
|
-1.4
|
-2.1
|
-1.1
|
-0.6
|
-0.9
|
2
|
|
3
|
-3.5
|
-3.1
|
-2.4
|
-2.0
|
-2.8
|
-4.3
|
-2.8
|
-2.9
|
-3.6
|
-4.0
|
-5.2
|
-4.8
|
-3.1
|
-2.5
|
-2.2
|
-1.6
|
-1.5
|
-0.8
|
-0.9
|
3
|
|
4
|
-3.5
|
-3.2
|
-3.3
|
-2.7
|
-3.5
|
-4.8
|
-3.1
|
-3.3
|
-4.4
|
-5.2
|
-5.1
|
-4.5
|
-3.1
|
-3.1
|
-2.3
|
-1.9
|
-1.6
|
-0.9
|
|
4
|
|
5
|
-3.8
|
-4.1
|
-3.6
|
-3.4
|
-3.9
|
-5.0
|
-3.4
|
-4.4
|
-5.5
|
-5.1
|
-4.8
|
-4.3
|
-3.4
|
-3.2
|
-2.6
|
-2.0
|
-1.7
|
|
|
5
|
|
6
|
-4.6
|
-4.3
|
-4.3
|
-3.9
|
-4.2
|
-5.4
|
-4.5
|
-5.5
|
-5.3
|
-4.9
|
-4.8
|
-4.5
|
-3.5
|
-3.5
|
-2.8
|
-2.0
|
|
|
|
6
|
|
7
|
-5.0
|
-4.8
|
-4.7
|
-4.1
|
-4.7
|
-6.2
|
-5.5
|
-5.5
|
-4.9
|
-4.9
|
-5.0
|
-4.5
|
-3.6
|
-3.7
|
-2.9
|
|
|
|
|
7
|
|
8
|
-5.3
|
-5.1
|
-4.8
|
-4.7
|
-5.6
|
-7.8
|
-5.6
|
-5.1
|
-4.8
|
-5.2
|
-5.1
|
-4.5
|
-3.7
|
-3.8
|
|
|
|
|
|
8
|
|
9
|
-5.4
|
-5.4
|
-5.2
|
-5.5
|
-7.2
|
-8.0
|
-5.1
|
-4.9
|
-4.9
|
-5.3
|
-5.1
|
-4.4
|
-3.7
|
|
|
|
|
|
|
9
|
|
10
|
-5.7
|
-6.0
|
-6.1
|
-7.0
|
-7.6
|
-7.9
|
-5.0
|
-4.9
|
-5.0
|
-5.2
|
-5.0
|
-4.3
|
|
|
|
|
|
|
|
10
|
|
11
|
-6.0
|
-6.9
|
-7.5
|
-7.2
|
-7.4
|
-8.1
|
-5.0
|
-4.9
|
-4.8
|
-5.0
|
-4.8
|
|
|
|
|
|
|
|
|
11
|
|
12
|
-6.9
|
-8.4
|
-7.8
|
-7.2
|
-7.6
|
-8.4
|
-4.9
|
-4.6
|
-4.6
|
-4.9
|
|
|
|
|
|
|
|
|
|
12
|
|
13
|
-8.5
|
-9.0
|
-7.7
|
-7.4
|
-7.9
|
-8.2
|
-4.7
|
-4.4
|
-4.5
|
|
|
|
|
|
|
|
|
|
|
13
|
|
14
|
-9.0
|
-9.0
|
-7.9
|
-7.6
|
-7.7
|
-8.0
|
-4.5
|
-4.2
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
15
|
-9.1
|
-9.2
|
-8.2
|
-7.5
|
-7.4
|
-7.6
|
-4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
16
|
-9.3
|
-9.5
|
-7.8
|
-7.2
|
-7.0
|
-7.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
17
|
-9.7
|
-9.1
|
-7.5
|
-6.9
|
-6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
18
|
-9.1
|
-8.7
|
-7.2
|
-6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
19
|
-8.7
|
-8.3
|
-6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
20
|
-8.2
|
-7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
Base
Span
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
1
|
2.7
|
1.8
|
1.9
|
1.3
|
-1.7
|
1.8
|
0.1
|
0.7
|
0.9
|
0.1
|
0.0
|
1.1
|
1.1
|
1.1
|
0.1
|
-0.2
|
1.0
|
-0.8
|
-0.7
|
1
|
|
2
|
2.3
|
2.2
|
1.9
|
-0.1
|
0.1
|
1.5
|
0.6
|
0.6
|
0.8
|
0.1
|
0.8
|
1.9
|
1.4
|
1.0
|
-0.3
|
0.7
|
0.3
|
-0.7
|
-0.7
|
2
|
|
3
|
2.8
|
2.2
|
1.2
|
0.8
|
0.3
|
1.7
|
0.5
|
0.6
|
0.6
|
0.9
|
1.4
|
2.0
|
1.2
|
0.7
|
0.6
|
0.2
|
0.2
|
-0.7
|
-0.7
|
3
|
|
4
|
2.7
|
1.8
|
1.7
|
0.8
|
0.8
|
1.7
|
0.6
|
0.6
|
1.2
|
1.4
|
1.7
|
1.6
|
0.9
|
1.2
|
0.7
|
0.2
|
0.2
|
-0.6
|
|
4
|
|
5
|
2.5
|
2.1
|
1.6
|
1.2
|
0.8
|
1.6
|
0.5
|
1.4
|
1.5
|
1.6
|
1.5
|
1.4
|
1.3
|
1.3
|
0.9
|
0.2
|
0.1
|
|
|
5
|
|
6
|
2.8
|
2.0
|
2.0
|
1.2
|
0.7
|
1.5
|
1.2
|
1.7
|
1.5
|
1.4
|
1.3
|
1.6
|
1.4
|
1.4
|
1.0
|
0.2
|
|
|
|
6
|
|
7
|
2.7
|
2.2
|
1.9
|
1.1
|
0.7
|
1.7
|
1.5
|
1.8
|
1.2
|
1.2
|
1.6
|
1.6
|
1.5
|
1.5
|
1.1
|
|
|
|
|
7
|
|
8
|
2.7
|
2.1
|
1.6
|
1.0
|
0.9
|
2.1
|
1.7
|
1.4
|
1.0
|
1.4
|
1.7
|
1.6
|
1.6
|
1.6
|
|
|
|
|
|
8
|
|
9
|
2.5
|
1.9
|
1.3
|
1.1
|
1.1
|
2.3
|
1.3
|
1.2
|
1.2
|
1.5
|
1.8
|
1.7
|
1.6
|
|
|
|
|
|
|
9
|
|
10
|
2.1
|
1.6
|
1.2
|
1.3
|
1.3
|
2.3
|
1.2
|
1.2
|
1.2
|
1.5
|
1.8
|
1.6
|
|
|
|
|
|
|
|
10
|
|
11
|
1.7
|
1.4
|
1.3
|
1.3
|
1.4
|
2.3
|
1.2
|
1.2
|
1.1
|
1.5
|
1.8
|
|
|
|
|
|
|
|
|
11
|
|
12
|
1.4
|
1.5
|
1.1
|
1.3
|
1.5
|
2.4
|
1.1
|
1.1
|
1.1
|
1.5
|
|
|
|
|
|
|
|
|
|
12
|
|
13
|
1.5
|
1.3
|
1.1
|
1.4
|
1.5
|
2.4
|
1.0
|
1.0
|
1.0
|
|
|
|
|
|
|
|
|
|
|
13
|
|
14
|
1.2
|
1.3
|
1.2
|
1.4
|
1.5
|
2.4
|
1.0
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
15
|
1.0
|
1.3
|
1.3
|
1.4
|
1.5
|
2.4
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
16
|
1.0
|
1.5
|
1.3
|
1.4
|
1.5
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
17
|
1.2
|
1.4
|
1.3
|
1.4
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
18
|
1.1
|
1.4
|
1.3
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
19
|
1.0
|
1.4
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
20
|
0.9
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
Base
Span
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
1
|
1.2
|
1.6
|
-1.5
|
-0.2
|
-2.1
|
-0.2
|
-0.8
|
-1.1
|
0.5
|
-1.7
|
-3.2
|
-0.5
|
1.4
|
0.3
|
-1.5
|
-1.7
|
-0.5
|
-1.6
|
-2.1
|
1
|
|
2
|
1.2
|
1.0
|
-0.2
|
-1.4
|
-1.1
|
0.0
|
-1.1
|
-1.1
|
-0.1
|
-2.5
|
-1.7
|
0.4
|
0.9
|
-0.5
|
-2.2
|
-1.2
|
-1.2
|
-2.0
|
-2.2
|
2
|
|
3
|
1.3
|
1.4
|
0.0
|
-1.0
|
-0.8
|
-0.5
|
-1.2
|
-0.9
|
-0.9
|
-1.2
|
-0.8
|
0.4
|
0.0
|
-1.0
|
-1.1
|
-1.6
|
-1.4
|
-2.2
|
-2.2
|
3
|
|
4
|
1.4
|
1.6
|
0.3
|
-0.9
|
-1.0
|
-0.9
|
-1.0
|
-1.1
|
-0.1
|
-0.7
|
-0.5
|
-0.4
|
-0.6
|
-0.5
|
-0.9
|
-1.6
|
-1.5
|
-2.2
|
|
4
|
|
5
|
1.9
|
1.8
|
-0.1
|
-1.1
|
-1.3
|
-0.8
|
-1.2
|
0.0
|
0.0
|
-0.5
|
-0.9
|
-1.0
|
-0.5
|
-0.3
|
-0.6
|
-1.7
|
-1.6
|
|
|
5
|
|
6
|
2.2
|
1.5
|
-0.5
|
-1.3
|
-1.2
|
-1.1
|
-0.2
|
0.2
|
0.0
|
-1.2
|
-1.3
|
-0.9
|
-0.4
|
-0.2
|
-0.5
|
-1.7
|
|
|
|
6
|
|
7
|
2.0
|
1.1
|
-0.9
|
-1.1
|
-1.5
|
-0.9
|
-0.1
|
0.3
|
-0.7
|
-1.7
|
-1.2
|
-0.8
|
-0.5
|
-0.1
|
-0.4
|
|
|
|
|
7
|
|
8
|
1.6
|
0.7
|
-0.7
|
-1.1
|
-1.2
|
-0.7
|
0.0
|
-0.4
|
-1.2
|
-1.7
|
-1.1
|
-0.9
|
-0.6
|
-0.1
|
|
|
|
|
|
8
|
|
9
|
1.1
|
0.8
|
-0.7
|
-1.0
|
-1.2
|
-0.5
|
-0.6
|
-0.7
|
-1.2
|
-1.7
|
-1.1
|
-1.0
|
-0.6
|
|
|
|
|
|
|
9
|
|
10
|
1.0
|
0.8
|
-0.4
|
-1.1
|
-1.2
|
-0.8
|
-1.0
|
-1.0
|
-1.4
|
-1.8
|
-1.1
|
-1.0
|
|
|
|
|
|
|
|
10
|
|
11
|
0.6
|
0.6
|
-0.5
|
-1.2
|
-1.2
|
-0.9
|
-1.2
|
-1.2
|
-1.6
|
-1.9
|
-1.1
|
|
|
|
|
|
|
|
|
11
|
|
12
|
0.5
|
0.6
|
-0.8
|
-1.2
|
-1.3
|
-1.3
|
-1.5
|
-1.4
|
-1.8
|
-1.9
|
|
|
|
|
|
|
|
|
|
12
|
|
13
|
0.5
|
0.5
|
-0.8
|
-1.3
|
-1.6
|
-1.2
|
-1.7
|
-1.5
|
-1.9
|
|
|
|
|
|
|
|
|
|
|
13
|
|
14
|
0.1
|
0.4
|
-1.0
|
-1.6
|
-1.6
|
-1.2
|
-1.8
|
-1.7
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
15
|
-0.1
|
0.2
|
-1.3
|
-1.5
|
-1.6
|
-1.2
|
-1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
16
|
-0.4
|
-0.1
|
-1.2
|
-1.5
|
-1.5
|
-1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
17
|
-0.5
|
-0.1
|
-1.3
|
-1.4
|
-1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
18
|
-0.7
|
-0.1
|
-1.3
|
-1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
19
|
-0.8
|
-0.2
|
-1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
20
|
-0.9
|
-0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
Base
Span
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
1
|
-1.3
|
-1.4
|
0.4
|
-1.2
|
-0.7
|
0.4
|
0.4
|
0.0
|
0.5
|
0.3
|
0.7
|
-0.4
|
0.2
|
1.0
|
1.9
|
1.9
|
0.8
|
2.6
|
3.0
|
1
|
|
2
|
-1.0
|
-0.7
|
0.1
|
-1.0
|
0.0
|
0.4
|
0.1
|
0.7
|
0.2
|
0.6
|
0.0
|
-0.3
|
1.1
|
1.5
|
2.7
|
1.4
|
2.1
|
3.3
|
3.0
|
2
|
|
3
|
-1.0
|
-0.3
|
-0.4
|
-0.6
|
0.1
|
0.1
|
0.4
|
0.4
|
0.3
|
0.0
|
0.0
|
0.5
|
1.5
|
2.0
|
2.0
|
2.4
|
2.6
|
3.4
|
3.1
|
3
|
|
4
|
-0.7
|
-0.4
|
-0.2
|
-0.2
|
-0.1
|
0.0
|
0.3
|
0.4
|
-0.3
|
0.0
|
0.6
|
1.1
|
1.9
|
1.7
|
2.3
|
2.7
|
2.8
|
3.4
|
|
4
|
|
5
|
-1.1
|
0.0
|
-0.5
|
-0.2
|
-0.1
|
0.0
|
0.3
|
-0.3
|
-0.1
|
0.5
|
1.0
|
1.5
|
1.6
|
2.0
|
2.4
|
2.9
|
2.9
|
|
|
5
|
|
6
|
-1.0
|
0.0
|
-0.4
|
-0.2
|
0.0
|
-0.1
|
-0.1
|
-0.2
|
0.4
|
1.1
|
1.4
|
1.3
|
1.9
|
2.1
|
2.4
|
3.0
|
|
|
|
6
|
|
7
|
-0.8
|
0.1
|
-0.5
|
0.0
|
-0.1
|
0.1
|
0.0
|
0.3
|
1.1
|
1.5
|
1.2
|
1.7
|
1.8
|
2.1
|
2.4
|
|
|
|
|
7
|
|
8
|
-0.5
|
0.1
|
0.0
|
0.3
|
0.2
|
0.4
|
0.4
|
0.9
|
1.4
|
1.4
|
1.5
|
1.6
|
1.7
|
2.2
|
|
|
|
|
|
8
|
|
9
|
-0.3
|
0.5
|
0.5
|
0.6
|
0.5
|
1.1
|
0.9
|
1.2
|
1.4
|
1.8
|
1.5
|
1.6
|
1.7
|
|
|
|
|
|
|
9
|
|
10
|
0.2
|
1.0
|
1.1
|
0.8
|
1.4
|
1.4
|
1.2
|
1.4
|
1.9
|
1.8
|
1.4
|
1.6
|
|
|
|
|
|
|
|
10
|
|
11
|
0.9
|
1.5
|
1.3
|
1.5
|
1.6
|
1.6
|
1.3
|
1.8
|
2.0
|
1.8
|
1.4
|
|
|
|
|
|
|
|
|
11
|
|
12
|
1.4
|
1.8
|
2.1
|
1.9
|
1.8
|
1.9
|
1.7
|
1.9
|
2.0
|
1.8
|
|
|
|
|
|
|
|
|
|
12
|
|
13
|
1.6
|
2.8
|
2.4
|
2.2
|
2.2
|
2.0
|
1.8
|
2.0
|
2.0
|
|
|
|
|
|
|
|
|
|
|
13
|
|
14
|
2.5
|
3.1
|
2.6
|
2.6
|
2.2
|
1.9
|
1.8
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
15
|
3.0
|
3.4
|
2.9
|
2.7
|
2.2
|
1.8
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
16
|
3.4
|
3.7
|
2.7
|
2.5
|
2.1
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
17
|
3.4
|
3.5
|
2.6
|
2.5
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
18
|
3.4
|
3.4
|
2.4
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
19
|
3.4
|
3.3
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
20
|
3.4
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
|
15-year average per capita potential growth
|
|
Explanatory
variables
|
OLS
|
2SLS (LO)
|
2SLS (LO mod)
|
|
Log GDP (PPP)
|
-0.589***
(0.0386)
|
-0.611***
(0.0413)
|
-0.579***
(0.0424)
|
|
Institutional
delivery
|
0.0951***
(0.0317)
|
0.116***
(0.0394)
|
0.0839**
(0.0408)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0357*
(0.0186)
|
-0.0420**
(0.0195)
|
|
(Debt>60) x
Institutional delivery
|
0.131***
(0.0283)
|
0.123***
(0.0289)
|
0.139***
(0.0298)
|
|
Constant
|
2.127***
(0.0988)
|
2.181***
(0.105)
|
2.100***
(0.107)
|
|
Observations
|
208
|
208
|
208
|
|
R-squared
|
0.911
|
0.910
|
0.911
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15-year average per capita
potential growth
|
|
Explanatory
variables
|
OLS
|
2SLS (LO)
|
2SLS (gen. div.)
|
|
Log GDP
(PPP)
|
-0.589***
(0.0386)
|
-0.611***
(0.0413)
|
-0.674***
(0.121)
|
|
Institutional
delivery
|
0.0951***
(0.0317)
|
0.116***
(0.0394)
|
0.163
(0.124)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0357*
(0.0186)
|
-0.0357
(0.0276)
|
|
(Debt>60)
x Institutional delivery
|
0.131***
(0.0283)
|
0.123***
(0.0289)
|
0.161**
(0.0635)
|
|
Constant
|
2.127***
(0.0988)
|
2.181***
(0.105)
|
2.341***
(0.316)
|
|
Observations
|
208
|
208
|
208
|
|
R-squared
|
0.911
|
0.910
|
0.899
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
15-year average per capita
potential growth
|
|
Explanatory
variables
|
OLS
|
2SLS
|
OLS Kunčić
|
2SLS Kunčić
|
|
Log GDP
(PPP)
|
-0.589***
(0.0386)
|
-0.611***
(0.0413)
|
-0.559***
(0.0354)
|
-0.693***
(0.0930)
|
|
Institutions
|
0.0951***
(0.0317)
|
0.116***
(0.0394)
|
0.457***
(0.163)
|
1.120**
(0.481)
|
|
(Debt>60)
|
-0.0394*
(0.0197)
|
-0.0357*
(0.0186)
|
-0.0145
(0.0245)
|
-0.0155
(0.0267)
|
|
(Debt>60)
x Institutional delivery
|
0.131***
(0.0283)
|
0.123***
(0.0289)
|
0.616***
(0.184)
|
1.037**
(0.428)
|
|
Constant
|
2.127***
(0.0988)
|
2.181***
(0.105)
|
2.045***
(0.0955)
|
2.381***
(0.236)
|
|
Observations
|
208
|
208
|
277
|
277
|
|
R-squared
|
0.911
|
0.910
|
0.849
|
0.798
|
Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
|
|
WGI delivery (not transformed)
|
|
|
|
1996
|
>1.33
|
2008
|
2014
|
|
GR
|
Early EA
|
0.70
|
|
0.60
|
0.22
|
|
IT
|
Early EA
|
0.75
|
|
0.48
|
0.32
|
|
FR
|
Early EA
|
1.26
|
|
1.43
|
1.31
|
|
PT
|
Early EA
|
1.30
|
|
1.04
|
0.95
|
|
ES
|
Early EA
|
1.30
|
|
1.11
|
0.85
|
|
BE
|
Early EA
|
1.41
|
x
|
1.36
|
1.41
|
|
IE
|
Early EA
|
1.64
|
x
|
1.72
|
1.69
|
|
DE
|
Early EA
|
1.70
|
x
|
1.62
|
1.78
|
|
AT
|
Early EA
|
1.79
|
x
|
1.81
|
1.61
|
|
LU
|
Early EA
|
1.87
|
x
|
1.77
|
1.82
|
|
FI
|
Early EA
|
1.89
|
x
|
1.99
|
2.06
|
|
NL
|
Early EA
|
1.92
|
x
|
1.84
|
1.90
|
|
LV
|
New EA
|
0.10
|
|
0.63
|
0.84
|
|
SK
|
New EA
|
0.40
|
|
0.72
|
0.59
|
|
LT
|
New EA
|
0.45
|
|
0.61
|
0.89
|
|
EE
|
New EA
|
0.59
|
|
1.15
|
1.34
|
|
MT
|
New EA
|
0.88
|
|
1.28
|
1.05
|
|
SI
|
New EA
|
1.07
|
|
0.98
|
0.83
|
|
CY
|
New EA
|
1.28
|
|
1.33
|
1.09
|
|
BG
|
Non EA
|
-0.41
|
|
0.05
|
0.08
|
|
HR
|
Non EA
|
-0.38
|
|
0.27
|
0.40
|
|
RO
|
Non EA
|
-0.17
|
|
0.02
|
0.15
|
|
PL
|
Non EA
|
0.66
|
|
0.54
|
0.82
|
|
CZ
|
Non EA
|
0.78
|
|
0.83
|
0.87
|
|
HU
|
Non EA
|
0.78
|
|
0.80
|
0.48
|
|
SE
|
Non EA
|
1.84
|
x
|
1.93
|
1.93
|
|
GB
|
Non EA
|
1.90
|
x
|
1.68
|
1.77
|
|
DK
|
Non EA
|
1.96
|
x
|
2.14
|
1.97
|
|
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2008
|
2014
|
|
BE
|
128.0
|
123.2
|
118.2
|
114.4
|
108.8
|
107.6
|
92.4
|
106.7
|
|
IT
|
116.3
|
113.7
|
110.8
|
109.6
|
105.1
|
104.7
|
102.3
|
132.3
|
|
GR
|
101.2
|
99.3
|
97.2
|
98.6
|
104.7
|
106.8
|
109.4
|
178.6
|
|
BG
|
|
97.3
|
69.3
|
76.1
|
71.2
|
64.7
|
13.0
|
27.0
|
|
AT
|
68.0
|
63.2
|
63.6
|
66.4
|
65.9
|
66.5
|
68.5
|
84.2
|
|
MT
|
38.7
|
46.6
|
51.2
|
62.1
|
60.9
|
65.5
|
62.7
|
66.9
|
|
SE
|
70.3
|
68.2
|
66.7
|
61.5
|
50.6
|
51.7
|
36.8
|
44.9
|
|
ES
|
65.6
|
64.4
|
62.5
|
60.9
|
58.0
|
54.2
|
39.4
|
99.3
|
|
FR
|
59.7
|
61.1
|
61.0
|
60.2
|
58.7
|
58.2
|
68.1
|
95.6
|
|
DE
|
57.6
|
58.8
|
59.4
|
60.0
|
58.9
|
57.7
|
65.0
|
74.9
|
|
HU
|
71.6
|
62.1
|
60.0
|
59.9
|
55.1
|
51.7
|
71.6
|
76.2
|
|
NL
|
71.2
|
65.6
|
62.5
|
58.2
|
51.4
|
48.7
|
54.5
|
68.2
|
|
DK
|
69.9
|
65.8
|
61.8
|
58.2
|
52.4
|
48.5
|
33.4
|
44.6
|
|
CY
|
49.2
|
53.2
|
54.8
|
55.1
|
55.1
|
56.9
|
45.1
|
108.2
|
|
PT
|
59.5
|
55.2
|
51.8
|
51.0
|
50.3
|
53.4
|
71.7
|
130.2
|
|
SK
|
30.5
|
33.0
|
33.9
|
47.1
|
49.6
|
48.3
|
28.2
|
53.5
|
|
IE
|
69.9
|
61.6
|
51.5
|
46.7
|
36.1
|
33.2
|
42.4
|
107.5
|
|
FI
|
55.3
|
52.2
|
46.9
|
44.1
|
42.5
|
41.0
|
32.7
|
59.3
|
|
GB
|
47.8
|
46.6
|
44.0
|
41.7
|
38.9
|
36.0
|
51.7
|
88.2
|
|
PL
|
42.4
|
42.3
|
38.4
|
39.0
|
36.5
|
37.3
|
46.6
|
50.4
|
|
SI
|
21.6
|
22.1
|
22.8
|
23.7
|
25.9
|
26.1
|
21.6
|
80.8
|
|
LT
|
13.9
|
15.4
|
16.5
|
22.7
|
23.5
|
22.9
|
14.6
|
40.7
|
|
RO
|
10.6
|
14.9
|
16.7
|
21.6
|
22.4
|
25.7
|
13.2
|
39.8
|
|
CZ
|
11.6
|
12.1
|
13.9
|
15.2
|
17.0
|
22.8
|
28.7
|
42.7
|
|
LV
|
13.3
|
10.7
|
9.0
|
12.1
|
12.1
|
13.9
|
18.7
|
40.8
|
|
EE
|
7.5
|
7.0
|
6.0
|
6.5
|
5.1
|
4.8
|
4.5
|
10.4
|
|
LU
|
7.6
|
7.5
|
7.2
|
6.4
|
7.6
|
6.6
|
14.4
|
23.0
|
|
HR
|
|
|
|
|
|
36.1
|
38.9
|
85.1
|
|
EA19
|
72.7
|
72.2
|
71.7
|
70.6
|
68.0
|
67.0
|
68.5
|
94.5
|
|
EU28
|
|
|
|
|
|
59.8
|
61.0
|
88.6
|
Chart 1Catching-up effects (real GDP per capita in 1999 and potential GDP per capita growth in 1999-2014) DISPLAY Chart
Chart 2Institutional delivery indicator (1999 vs. 2014) DISPLAY Chart
Chart 3Institutions, debt and country-groups DISPLAY Chart
Table 1Key summary statistics of the indicators used in the regression analysis6 DISPLAY Table
Table 2Estimation output of equation (1) DISPLAY Table
Chart 4Contributions to the cumulative potential GDP per capita growth – estimated equation (1) DISPLAY Chart
Table 3Changing the country coverage (OLS estimates) DISPLAY Table
Table 4Changing debt thresholds (OLS) – Baseline sample EU27 DISPLAY Table
Table 5Counterfactual exercises DISPLAY Table
Table 6Expanding the original model for the EU27 countries DISPLAY Table
Table 7Expanding the sample period for the EU 27 countries DISPLAY Table
Table 8Different measures of GDP growth and GDP levels DISPLAY Table
Table 9R² of equation (5) DISPLAY Table
Table 10Varying growth spans DISPLAY Table
Table 11Cross-sectional results DISPLAY Table
Table A2First stage of 2SLS regression shown in table 2 DISPLAY Table
Table A3Changing the country coverage (2SLS) DISPLAY Table
Table A4Changing debt thresholds (2SLS) – baseline sample EU27 DISPLAY Table
Table A5Expanding the original model (2SLS) – baseline sample EU27 DISPLAY Table
Table A6Expanding the sample period with different institutional indicators (2SLS) DISPLAY Table
Table A7 (a)Changing the country grouping DISPLAY Table
Table A7 (b)Changing the country grouping (2SLS) DISPLAY Table
Table A8 (1)Institutions refers to Economic Complexity DISPLAY Table
Table A8 (2)Institutions refers to Chinn-Ito Index DISPLAY Table
Table A8 (3)Institutions refers to Economic Freedom from the Fraser institute DISPLAY Table
Table A8 (4)Institutions refers to Economic Freedom from the Heritage Foundation DISPLAY Table
Table A9 (1)t-statistic of the catching-up term in equation (5) DISPLAY Table
Table A9 (2)t-statistic of the institutions term in equation (5) DISPLAY Table
Table A9 (3)t-statistic of the debt dummy term in equation (5) DISPLAY Table
Table A9 (4)t-statistic of the interaction term in equation (5) DISPLAY Table
Table A10Modified legal origin DISPLAY Table
Table A11Human diversity instrumenting institutions DISPLAY Table
Table A12Institutional quality as estimated by Kunčić DISPLAY Table
Table AxCountries WGI delivery DISPLAY Table
Table AyGeneral Government Debt in % DISPLAY Table
Chart AxCountry group mean development of WGI-delivery over time DISPLAY Chart
* Preliminary versions of the paper were presented in 2015 at an IMF internal seminar, NABE conference in Munich, Bruegel seminar in Paris and in 2016 at the European Finance Forum in Frankfurt. It benefited from comments from meeting participants at these events. Without implicating them, very useful comments were received (in alphabetical order) from Daron Acemoglu, John Christopher Bluedorm, Kevin Cardiff, Cristina Checherita-Westphal, Joao Nogueira Martins, Athanasios Orphanides, Peter Praet, Andre Sapir, Jesus Fernandez-Villaverde. The authors would also like to thank to the two anonymous referees for useful comments and suggestions. The views expressed in this paper are those of the authors and they do not necessarily coincide with those of the European Central Bank or the Eurosystem. Edmund Moshammer was trainee at the ECB at the time of writing the paper.
1 Luxemburg is excluded from the sample, as GDP per capita is not a meaningful variable, given the very large number of employees commuting cross-borders.
3 See Helliwell et al. (  2014).
4 For EU-28 data is available from 2001 to 2017. For EU-27 excluding the latest entrant Croatia, data from 1998 onwards is available.
5 There is no European Commission data on the level of Croatian government debt in 1999.
6 General government debt data are reported in annex 2.
7 In La Porta et al. ( 1999) countries are grouped according to English (CY, IE, UK), French (MT, BE, ES, FR, GR, IT, NL, PL), German (AT, DE), Soviet (EE, LT, LV, SI, SK, BG, CZ, HR, HU, PL, RO) and Scandinavian (FI, DK, SE) legal origins. As there are doubts about the Soviet legal origin of SI and HR, robustness checks have been carried out by using German origin for these countries (see annex 7). Annex 7 also reports the outcome of 2SLS using human diversity as instrumental variable.
8 Annex 3 reports step 1 estimates of the 2SLS.
9 It is well known that Belgium conducted sound fiscal policies with high primary surpluses after joining the euro area. Possibly, good institutions are conducive to disciplined fiscal policies.
10 Annex 4 reports the estimates for the EU15 and the CEECs countries (transition countries in table 1) separately, to take into account the differences between the two groups in terms of GDP per capita, initial level of debt and institutions. The same exercise is shown for the whole EU and EU15 excluding Greece, to test if Greece could be driving the results. Table A7a in annex 4 shows the results are robust when considering the EU15 groups and when excluding Greece from the whole EU and EU15 group.
11 Note that for PT and SI this counterfactual result is only associated with improved institutions, as the initial debt level in 1999 was below 60%, while for the other three countries the results reflect both lower debt levels and improved institutions at the start of 1999, compared to the actual values.
12 Comparing the first and the second exercise suggests that, e.g. in the case of Greece 0.5 p.p. higher annual real growth is associated with the lower initial debt level, and an additional 0.9 p.p. annual growth is associated with a much improved institutional quality, given debt below 60%. Given that the importance of above average institutions increases with the debt threshold, debt above the higher threshold (70%) coupled with very good institutions can be associated with even higher real growth. To remain on the prudent side, we do not think that this effect should be included in the counterfactual exercises, also as it seems driven by relatively few observations. In any case, the counterfactual result of the impact of better institutions on long-term growth appears rather large even without this effect.
|
|
June, 2017
II/2017
|
