Studying the non-linear effects of institutional quality on economic growth: evidence from the GMM model

Abstract

Economic growth has been an attractive topic. In this paper, with data from 71 countries in the period of 1986-2015, we employed GMM model and found that institutional quality plays a fundamental role in supporting support economic growth in the long run, in addition to traditional economic factors such as capital, labor, TFP, etc.. However, institutional quality only promotes economic growth when reaching a certain threshold. Hence, below this threshold, the improvement of institutional quality has a negative impact on economic growth.