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

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  • d'Agostino, Giorgio
  • Scarlato, Margherita
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.

Suggested Citation

  • d'Agostino, Giorgio & Scarlato, Margherita, 2012. "Inclusive Institutions, Innovation and Economic Growth: Estimates for European Countries," MPRA Paper 43098, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43098
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    More about this item

    Keywords

    Innovation; economic growth models; institutions and growth;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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