Institutions and economic growth in ECOWAS: an investigation into the hierarchy of institution hypothesis (HIH)
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 14 August 2020
Issue publication date: 7 September 2020
Abstract
Purpose
The purpose of this paper is to examine the relationship between the quality of different dimensions of institutional and economic growth in a panel of 15 member ECOWAS.
Design/methodology/approach
The study adopts Driscoll and Kraay′s nonparametric covariance matrix estimator, and the spatial error model to account for cross-section dependency, cross-country heterogeneity and spatial dependence inherent in empirical modelling, which has largely been ignored in previous studies. This is because, the likelihood that corruption and human capital cluster in space is very high because factors that affect these phenomena disperse across borders. Similarly, to test the threshold effect, the study adopts the more refined and more appropriate dynamic panel data which models a nonlinear asymmetric dynamics and cross-sectional heterogeneity, simultaneously, in a dynamic threshold panel data framework.
Findings
The empirical evidence supports findings by previous researchers that better-quality political and economic institutions can have positive effects on economic growth. Similarly, our results support a nonlinear relationship between political institutions and economic institution, confirming the “hierarchy of institution hypothesis” in ECOWAS. Specifically, the findings show that economic institutions will only have the desired economic outcome in ECOWAS, only when political institution is above a certain threshold.
Originality/value
Unlike previous studies which assume cross-sectional and spatial independence, the authors account for cross-section dependency and cross-country heterogeneity inherent in empirical modelling.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-10-2019-0630
Keywords
Acknowledgements
Data availability statement with submissions: The data that support the findings of this study are available from the corresponding author upon reasonable request.Funding: The authors declare that there is no funding for this article.
Citation
Olaoye, O. and Aderajo, O. (2020), "Institutions and economic growth in ECOWAS: an investigation into the hierarchy of institution hypothesis (HIH)", International Journal of Social Economics, Vol. 47 No. 9, pp. 1081-1108. https://doi.org/10.1108/IJSE-10-2019-0630
Publisher
:Emerald Publishing Limited
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