The Non-Linear Effects of Good Governance Index and Natural Recourses Abundance on Economic Growth in D8 Countries (Smoothing Transition Regression in Panel Data)

Document Type : Research Paper

Authors

1 Ph.D. Candidate of Economics, Abhar Branch, Islamic Azad University, Abhar, Iran.

2 Assistant Professor of Economics, Abhar Branch, Islamic Azad University, Abhar, Iran.

3 Associate Professor of Economics, Department of General Economic Affairs, Faculty of Economics, Kharazmi University, Tehran, Iran.

4 Assistant Professor of Management and Economics, Mohaghegh Ardabili University, Ardabil, Iran.

10.22103/jdc.2021.18367.1164

Abstract

Objective: The relationship between institutions and economic growth is one of the main issues in economic development debates and has been considered empirically in recent years. Hence, the main purpose of this paper is to investigate the effects of institutions and recourses management improvement on economic growth in D8 countries during the period of 1996-2019.
 Method: For achieving this objective, the econometric model is estimated by applying PSTR method in panel data.
 Results: The results of threshold estimation show that the threshold of good governance index is -0.67 and its effect on economic growth of Islamic developing countries before and after this value will be different. Since the value of good governance index in 8 developing Islamic countries is between -1.28 and -0.19, so it is expected that the estimated threshold is in the range between low and high. In addition, the value of the estimated threshold is in the neighborhood of its average value, -0.71. Moreover, the speed of transmission to the nonlinear section for these countries is 1.46. Furthermore, the good governance index in both regimes has a positive effect on economic growth, which, of course, increases its intensity by exceeding the threshold or entering the second regime or above average. It is expected that at high levels of governance (low levels of corruption and redundant regulations and political constraints and high levels of political stability and the rule of law and the effectiveness of government) where the quality of institutions is also high, all good governance components attract domestic and foreign investment, Accelerate economic growth rate.
The impact of human capital in both regimes is positive. In this regard, it can be argued that when governance and the quality of institutions are low, the necessary investments in human resources are not take place in this group of countries. The coefficients of abundance of natural resources are positive in both regimes, and with the transition to high levels of good governance (the second regime), the intensity of its positive influence increases. In other words, with the improvement of the good governance index and its components, the effect of natural resource management on production and economic growth has also improved, while in the low state of the good governance index, the abundance of natural resources has had a small effect on economic growth. Therefore, the effect of improving natural resources at a high level of good governance on the economic growth of Islamic countries is significant. The FDI has positive and significant impact on the GDP growth rate in every linear and non-linear parts.
So, in every regimes (linear and non-linear) good governance and natural resource abundance variables have positive and significant impacts on the economic growth and other explanatory variables such as gross capital formation, FDI and human capital have positive effects on GDP growth in every linear and nonlinear parts.
 Conclusion: in the high level of governance accompanied with low corruption, redundant rules, political constraints, all indices of good governance attract domestic and foreign investment and accelerate economic growth.

Keywords

Main Subjects

References

ابراهیم‌پور، حبیب؛ فتوره‌چی، زهرا؛ نعمتی، ولی و حمزه‌ای، نسرین (1399). تحلیل نقش تعدیل‌گر حکمرانی خوب در رابطه بین جهانی شدن و رشد اقتصادی در کشورهای درحال توسعه. مطالعات راهبردی سیاستگذاری عمومی، 10(36)، 69-40.
اسدی، زیور؛ بهرامی، جاوید و طالبلو، رضا (1392). تأثیر پدیده نفرین منابع بر توسعه مالی و رشد اقتصادی در قالب الگوی پانل پویا. پژوهش‌های رشد و توسعه اقتصادی، 3(10)، 26-9.
ایزدخواستی، حجت (1397). تحلیل تأثیر کیفیت حکمرانی و ترکیب مخارج دولت بر رشد اقتصادی در ایران: رویکرد رشد درون‌زا. اقتصاد مقداری، 15(4)، 165-135.
بشیری، عباس و شقاقی شهری، وحید (1390). حکمرانی خوب، فساد و رشد اقتصادی، بررسی‌های بازرگانی، 9(48)، 69-81.
جلیلی، زهرا و سلمانی‌بیشک، محمدرضا (1397). مطالعه رابطه وفور منابع حکمرانی رشد اقتصادی با تأکید بر نقش فناوری اطلاعات و ارتباطات. نظریه‌های کاربردی اقتصاد، 5(3)، 164-137.
رنانی، محسن (1376). بازار یا نابازار؟ بررسی موانع نهادی کارایی نظام اقتصادی بازار در اقتصاد ایران، سازمان برنامه و بودجه، مرکز مدارک اقتصادی- اجتماعی و انتشارات، تهران.
شاه‌آبادی، ابوالفضل و پورجوان، عبدالله (1391). رابطه حکمرانی با شاخص‌های توسعه اقتصادی- اجتماعی کشورهای برگزیده، مجله علوم اجتماعی دانشکده ادبیات و علوم انسانی دانشگاه فردوسی مشهد، 9(2)، 53-75.
شاه‌آبادی، ابوالفضل؛ ساری‌گل، سارا و تنهایی، حمید (1394). حکمرانی و آزادی اقتصادی (مطالعه موردی کشورهای گروه D8 وG7). سیاست‌های راهبردی و کلان، 3(12)، 148-123.
شاه‌آبادی، ابوالفضل و محمودی، عبداله (1385). تعیین کننده های سرمایه گذاری مستقیم خارجی در ایران. جستارهای اقتصادی، 3(5)، 129-92.
شریف آزاده، محمدرضا و حسین‌زاده بحرینی، محمدحسین (1382). تأثیرپذیری سرمایه‌گذاری خصوصی در ایران از شاخص‌های امنیت اقتصادی (1379-1358). نامه مفید، 9(38)، 192-159.
صادقی، مسعود و عمادزاده، مصطفی (1382). برآورد سهم سرمایه انسانی در رشد اقتصادی ایران طی سال‌های 1380-1345. پژوهش‌های اقتصادی ایران، 5(17)، 98-79.
فاتحی دابانلو، محمدحسین؛ هژبرکیانی، کامبیز؛ معمارنژاد، عباس و مهرآرا، محسن (1396). نهادها و توسعه در کشورهای خاورمیانه. مد‌لسازی اقتصادی، 11(39)، 118-99.
کمیجانی، اکبر و سلاطین، پروانه (1389). بررسی تأثیر کیفیت حکمرانی بر رشد اقتصادی در ایران و کشورهای منتخب همسایه (ترکیه و پاکستان). مدیریت، 7(20)، 41-27.
الماسی، مجتبی و سپهبان قره‌بابا، اصغر (1388). بررسی رابطه سرمایه‌گذاری در نیروی انسانی و سرمایه‌گذاری فیزیکی با رشد اقتصادی ایران طی دوره 1384-1350. پژوهش و برنامه‌ریزی در آموزش عالی، 15(53)، 186-157.
محمدی، حسین؛ محمدی، مرتضی و تیرگری، محمد (1396). بررسی عوامل موثر بر رشد تولید سرانه در گروه‌های مختلف درآمدی در جهان با تأکید بر شاخص‌های حکمرانی. تحقیقات مدلسازی اقتصادی، 8(30)، 145-109.
ملکی حسنوند، بهزاد؛ جعفری، محمد؛ فتاحی، شهرام و غفاری، هادی (1398). سازوکار اثرگذاری هم‌زمان حکمرانی خوب و مخارج دولتی بر رشد اقتصادی. پژوهش‌های رشد و توسعه اقتصادی، 9(34)، 114-99.
References
Abdelbary, I., & Benhin, J.K. (2019). Governance, capital and economic growth in the Arab Region. The Quarterly Review of Economics and Finance, Elsevier, 73, 184-191.
Acemoglu, D., & Robinson, J. (2012). Why nations fail: Origins of power, prosperity and poverty. http://www.levine.sscnet.ucla.edu/ general/aandrreview.pdf.
Acemoglu, D., Simon, J., Robinson, J.A., & Yunyong, T. (2002). Institutional causes, macroeconomic symptoms: Volatility, crises and growth, CEPR. Discussion Paper, No. 3575.
Aghion, P., & Durlauf, S.N. (2005). Handbook of economic growth. North Holland, Elsevier Press.
Aidt, T., Dutta, J., & Sena, V. (2008). Governance regimes, corruption and growth: Theory and evidence. Journal of Comparative Economics, 36(2), 195–220.
Almasi, M., & Sepahbab Gharaaah, A. (2009). Investigating the relationship between manpower investment and physical investment with Iran's economic growth during (1971-2005). Research and Planning in Higher Education, 15(53), 157-186 [In Persian].
Arezki, R., & Van der Ploeg, F. (2010). Do natural resources depress income per capita? CESifo, Working Paper, No. 3056.
Arshad khan, M., & Ali khan, Sh. (2011). Foreign direct investment and economic growth in Pakistan: A sectoral analysis, Pakistan Institute of Development Economics. Working Paper, No. 2011:67.
Asadi, Z., Bahrani, J., & Talelou, R. (2013). The effect of resource curse phenomenon on financial development and economic growth in the form of a dynamic panel model. Economic Growth and Development Research, 3(10), 9-26 [In Persian].
Avdulaj, J., Merko, F., & Klodian M. (2021). The role of good governance in economic development: evidence from eastern european transition countries. Journal Transition Studies Review, 28(1), 67-76.
Awti, S. (1994). Economic rent, abundance and growth. Journal of Economic Modeling, 15(3), 85-112.
Baldaccia, E., Hillmanb, A.L., & Kojo, N.C. (2003). Growth, governance, and fiscal policy transmission channels in low-income countries. European Journal of Political Economy, 20, 517–549.
Baltabaev, B. (2013). FDI and total factor productivity growth: New macro evidence, Department of Economics, Monash University, Monash Economics Working Paper, No. 27-13
Bashiri, A., & Shaghaghi Shahri, V. (2011). Good governance, corruption and economic growth. Business Reviews, 9(48), 69-81 [In Persian].
Bravo-Ortega, C., De Gregorio, J. (2002). The relative richness of the poor: natural resources, human capital and economic growth, Central Bank of Chile. Working Paper, No. 139.
Cavacanti, T., Mohaddes, K., & Raissi, M. (2011). Growth, development and natural resources: New evidence using a heterogeneous panel analysis. Journal of the Quarterly Review of Economics and Finance, 51(4), 305-318.
Colletaz, G., & Hurlin, C. (2006). Threshold effects of the public capital productivity: An international panel smooth transition approach. Working Paper, 1/2006, LEO, Université d'orleans: 1-39.
Cornelius, J.W. McArthur, Y., & Schwab, K. (2002). The global competitiveness report 2001–2002. New York: Oxford University Press.
Dias, J., & Tebaldi, E. (2012). Institutions, human capital, and growth: The institutional mechanism. Structural Change and Economic Dynamics, 23(3), 300–312.
Ebrahimpour, H., Fotourehchi, Z., Nemati, V., & Hamzeei, N. (2020). Analyzing the moderating role of good governance in the relationship between globalization and economic growth in developing countries. Strategic Studies of Public Policy, 10(36), 40-69 [In Persian].
Fan, R., Fang, Y., & Park, S.Y. (2012). Resource abundance and economic growth in China. Journal of China Economic Review, 23(3), 704-719.
Fatehi Dabanlou, M.H., Hojabbr Kiani, K., Memarnejad, A., & Mehrara, M. (2017), Institutions and development in middle east countries. Economic Modeling, 11(39), 99-118 [In Persian].
Flachaire, E., Garcia-Penalosa, C., & Konte, M. (2014). Political versus economic institutions in the growth process. Journal of Comparative Economics, 42(1), 212–229.
Frawsen, G., & Josefsson, H. (2004). FDI and developing countries, how to attract trans- national corporation? School of Economics and Management, LUND University.
Furman, J.L., & Hayes, R. (2004). Catching up or standing still? National innovative productivity among ‘follower’ countries, 1978–1999. Research Policy, 33(9), 1329–1354.
Gilbert, J. (2003). Trade liberalization and employment in developing economies. Economie Internationale, 2-3(94-95), 155-174.
Golejewska, A. (2010). Human capital and regional growth perspective, Faculty of Economics, University of Gdansk, Poland. Working Ppaer, No. 1204.
González, A., Teräsvirta, T., Van Dijk, D., & Yang, Y. (2017). Panel smooth transition regression models. SSE/EFI Working Paper Series in Economics and Finance 604, Stockholm School of Economics.
Gradstein, M. (2002). Rules, stability, and growth. Journal of Development Economics, 67(2), 471-484.
Hall, R.E., & Charles I.J. (1999). Why do some countries product so much more output per worker than other? Quarterly Journal of Economics, 114(1), 83-116.
Hamdi, H., & Sbia, R. (2013). The relationship between natural resources rents, trade openness and economic growth in Algeria. Journal of Economics Bulletin, 23(2), 1649-1659.
Hisamoglu, E. (2018). EU membership, institutions and growth: The case of Turkey. Economic Modeling, 38(1), 211–219.
Huang, C.J., & Ho, Y.H. (2017). Governance and economic growth in Asia. North Americanournal of Economics and Finance, 39, 260-272.
Huynh, K.P., & Jacho-Chavez, D.T. (2009). Growth and governance: A nonparametric analysis. Journal of Comparative Economics, 37(1), 121-143.
Ismahen, Y., & Najeh, B. (2019). Foreign direct investment and economic growth: The role of the governance. Economics Bulletin, 39(4), 2711-2725.
Iwaisako, T., & Futagami, K. (2013). Patent protection, capital accumulation, and economic growth. Journal of Economic Theory, 52(10), 631-668.
Izadkhasti, H. (2018). Analyzing the Impact of governance quality and composition of government expenditures on economic growth in Iran: An endogenous growth approach. Quantitative Economics, 15(4), 135-165 [In Persian].
Jalili, Z., & Salmani Bishak, M.R. (2018), Study the relationship between the abundance of governance resources of economic growth with emphasis on the role of information and communication technology. Applied Theories of Economics, 5(3), 137-164 [In Persian].
Jude, E. (2010). Financial development and growth: A panel smooth regression approach. Journal of Economic Development, 35(1), 15-33.
Kangundu, P. (2006). The quality of governance, composition of public Policy research, The World Bank, Working Paper, No. 3106.
Kaufmann, D., & Kraay, A. (2003). Governance matters III: governance indicators for 1996–2002. World Bank Policy Research Working Paper, No. 3106. Washington, DC: World Bank.
Knack, S. (2002). Democracy, governance and growth, University of Michigan Press.
Komijani, A., & Salatin, P. (2010). Investigating the effect of governance quality on economic growth in Iran and selected neighboring countries (Turkey & Pakistan). Management, 7(20), 27-41 [In Persian].
Kuznets, S. (1973). Modern economic growth: findings and reflections. American Economic Review, 63, 247-58.
Landon-Lane, J., & Robertson, P. (2003a). Accumulation and productivity growth in industrializing economies, Department of Economics of Rutgers University. Working Paper, No. 200305.
Landon-Lane, J., & Robertson, P. (2003b). Structural change, accumulation and growth in developing economies. Royal Economic Society Annual Conference, 2003 No 129.
Maleki Hassanvand, B., Jafari, M., Fattahi, S., & Ghafafari, H. (2019), Mechanism of simultaneous impact of good governance and government spending on economic growth. Economic Growth and Development Research, 9(34), 99-114 [In Persian].
Matallah, S. (2020). Economic diversification in MENA oil exporters: Understanding the role of governance. Resources Policy, 66, 1-11.
Mohammadi, H., Mohammadi, M., & Tirgari, M. (2017), Investigating the factors affecting the growth of per capita production in different income groups in the world with emphasis on governance indicators. Economic Modeling Research, 8(30), 109-145 [In Persian].
Neagu, O. (2012). Measuring the effects of human capital on growth in the case of Romania. Journal of Economics and Applied Informatics, 1, 83-92.
Pesaran, M.H., Friedman, M., & Frees, E.W. (2004). General diagnostic tests for cross section dependence in panels'. Cambridge Working Papers in Economics, University of Cambridge.
Poirson, H. (1998). Economic security, private investment and growth in developing countries, IMF. Working Paper, No. 9817.
Polasek, W., Schwarzbauer, W., & Sellner, R. (2010). Human capital and regional growth in Switzerland, Institute for Advanced Studies, Vienna. Economics Series, No. 250.
Putterman, L. (2013). Institutions, social capability, and economic growth, Economic Systems, 37(3), 345–353.
Renani, M. (1997). Market or non-market? Investigating the institutional barriers to the efficiency of the market economic system in the Iranian economy. Program and budget organization, Center for socio-economic documents and publications, Tehran [In Persian].
Sachs, J., & Woo, T. (1997). Understanding China's economic performance. NBER Working Paper, No. 5935 (Cambridge, Massachusetts: National Bureau of Economic Research).
Sachs. J.D., Warner, A.M., Schmidt-Traub, G., Kruk, M., Bahadur, C., Faye, M., & McCord, G. (2004). Ending Africa's poverty trap. Brookings Papers on Economic Activity, 35(1), 117-240.
Sadeghi, M., & Emadzadeh, M. (2003). Estimating the share of human capital in Iran's economic growth over the years of 1966-2001. Iranian Economic Research, 5(17), 79-98 [In Persian].
Sarmidi, T., Siong, H.L., & Jafari, Y. (2012). Resource curse: new evidence on the role of institutions. MPRA, Working Paper, No.37206.
Schultz, T.W. (1961). Investment in human capital. American Economic Review, 51(1-2), 163-184.
Shahabadi, A., & Mahmoudi, A. (2006). Main determinants of FDI in Iran. Journal of Iran’s Economic Essays, 3(5), 92-129 [In Persian].
Shahabadi, A., & Pourjavan, A. (2012). The relationship between governance and indicators of socio-economic development of selected countries. Journal of Social Sciences, Faculty of literature and humanities, Ferdowsi University of Mashhad, 9(2), 53-75 [In Persian].
Shahabadi, A., Sari Gol, S., & Tanhaei, H. (2015). Goovernance & economic freedom. Strategic and Macro Policies, 3(12), 123-148 [In Persian].
Sharif Azadehm M.R., & Hosseinzadeh Bahreini, M.H. (2003), The impact of private investment in Iran on economic security indicators. Mofid Letter, 9(38), 159-192 [In Persian].
Siham, M. (2020). Oil rents and economic growth in oil abundant MENA countries: Governance is matter? Journal of Social and Economic Development, 5(3), 124-138.
Sunde, U., & Vischer, T. (2011). Human capital and growth: Specification matters, School of Economics and Political Science, University of St. Gallen. Working Paper, No. 1131.
Tiwari, A.K., & Mutascu, M. (2011). Economic growth and FDI in Asia: A Panel-data approach. Journal of Economic Analysis and Policy (EAP), 41(2), 173-187.
Usui, N. (1997). Dutch disease and policy adjustments to the oil boom: A comparative study of Indonesia and Mexico. Resources Policy, 23(4), 151-162.
Vehovar, U., & Jager, M. (2003). Corruption, good governance and economic growth: The case of Slovenia. Paper presented at the conference Institutions in Transition. Kranjska Gora, Slovenia, 1-14.
Westerluns, J., & Edgerton, D. (2008). A simple test for cointegration in dependent panels with structural breaks, oxford bull. Economic Statistics, 70(5), 665–704.
World Bank (2020). http://data.worldbank.org.
Zubair, S.S., & Khan, M.A. (2014). Good governance: Pakistan's economic growth and worldwide governance indicators. Pakistan Journal of Commerce and Social Sciences, 8(1), 258-271.

Files

History

  • Receive Date: 20 October 2021
  • Revise Date: 12 November 2021
  • Accept Date: 20 November 2021

Share

How to cite

Statistics