Inclusive Institutions, Innovation and Economic Growth: Estimates for European Countries

Giorgio d'Agostino and Margherita Scarlato

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the theoretical and empirical foundations of the links between inclusive institutions, innovation and economic growth. Its first contribution to the literature is to provide a non-scale R&D-based growth model incorporating negative externalities linked to low institutional quality that not only affect the productivity of private and human capital, but also constrain the diffusion of existing technological knowledge. In turn, these negative externalities reduce economic growth. The second contribution of this paper is to run estimates for a sample of European Union countries. Empirical analysis based on pooled long- and short-run estimates confirms the importance of private capital and technology as instruments to increase economic growth in European countries and suggests the existence of a positive relationship between inclusive institutions, innovation and economic growth. The estimates also show that market failures linked to the degree of market competition and to the level of network interaction in the economic system significantly condition the influence of formal institutions on private capital, technology and GDP growth.

Keywords: Innovation; economic growth models; institutions and growth (search for similar items in EconPapers)
JEL-codes: C23 O30 O41 O43 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cse, nep-eec, nep-fdg, nep-ino, nep-knm and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43098

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