Shomron Center for Economic Policy Research

In Search for an efficient Institutions

Institutional development indices’ Data base and Rating

The project presented here, is our attempt to develop more sound assessments of the Institutions quality.

By now, a general consensus has been reached among economists concerning the importance of institutions for the development of the economy and of society as a whole. But the field where general agreement prevails concerning specific institutions is considerably narrower. Even so, it does include property rights. It would be logical to expect stable economic growth where property rights are protected. That is, where the rules of the game are strictly observed and the power of the government is limited and does not support monopolies, while economic agents devote themselves to productive activity and make investments. All this subsequently leads to stable economic growth. Different aspects of this connection among the data have been thoroughly studied in theory as part of the framework of the new institutional economy. Empirical evidence, by contrast, is not as clear-cut, nor as unambiguous.

Ratings evaluating the quality of institutions are widely known; they are generally used in academic and research literature. Among such ratings are some whose compilation procedure took decades to perfect. Dozens of assessments have been accumulated, pertaining to a large and growing list of countries. All these ratings use expert evaluations with country ranking. We suppose that such evaluations are essentially incompatible with each other, and therefore inapplicable in a comparative study at some one specific point in time chosen for observation (i.e., for a cross-section analysis). We propose a group of variables of our own, using evaluations of “political” institutions only to ascertain the presence or absence of a certain phenomenon (yes/no). Such a set of variables makes a cross-section analysis sensible. The countries’ Rule of Law Democracy and Limited Government experience (both are pretty formally defined) delivers us long run institutional development aggregate evaluation for cross-section analysis.

Thus, We had developed some instruments to provide our colleagues by improved institutions development (quality) assessment.

We also propose a pretty simple rating based on combining the proposed variables with indices and indicators which have already become widely accepted, but taking this combination as part of a data panel. At the same time, using a panel regression makes it possible to mitigate the problem of poor compatibility of expert evaluations.

The Data Base software is under construction now. We hope to present it by 2014 December.

The report “Freedom, Ratings and Economic Growth: In Search of Reliable Dependencies” containins some our methodological approaches description.  Calcul_inst_engdrft

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