The Impact of Institutional Friction Cost on Economic Growth: Evidence from OECD Countries
Abstract
1. Introduction
2. Literature Review
2.1. Economic Growth
2.2. Institutional Transaction Costs
2.3. Innovation
3. Methodology
3.1. Method of Calculation of Institutional Friction Cost
3.2. Data
3.3. Empirical model
4. Results and Discussions
4.1. Descriptive Statistics
4.2. Correlation Analysis
4.3. The Impact of Institutional Friction Cost on Economic Growth
4.4. Heterogeneity Analysis
4.5. Robustness Test
4.6. Endogeneity Test
4.7. Analysis of Mechanism Effect
5. Concluding Remarks
5.1. Summary
5.2. Concluding Remarks
5.3. Propositions for Future Research
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Field | Institutional Friction Cost Content |
---|---|
Starting a business | procedures, time, cost, paid-in minimum capital |
Dealing with construction permits | procedures, time, cost |
Getting electricity | procedures, time, cost |
Registering property | procedures, time, cost |
Getting credit | Not included |
Protecting minority investors | Not included |
Paying taxes | procedures, time, total tax, VAT refund |
Trading across borders | Time, cost |
Enforcing contracts | Time, cost |
Resolving insolvency | Time, cost |
Variables | Num. Obs. | Mean | Sd | Min | Max |
---|---|---|---|---|---|
GDP | 608 | 10.26 | 0.723 | 7.931 | 11.69 |
IFC | 612 | 3.146 | 0.356 | 2.334 | 3.960 |
CAP | 627 | 26.58 | 2.784 | 21.93 | 33.99 |
FDI | 551 | 23.19 | 1.645 | 17.33 | 27.32 |
LAB | 646 | 15.66 | 1.489 | 12.06 | 18.94 |
GOV | 568 | 3.493 | 0.290 | 2.757 | 4.133 |
TRADE | 646 | 72.65 | 39.44 | 18.34 | 182.1 |
GDP | IFC | CAP | LAB | FDI | GOV | TRADE | |
---|---|---|---|---|---|---|---|
GDP | 1 | ||||||
IFC | −0.592 *** | 1 | |||||
CAP | −0.198 *** | 0.0190 | 1 | ||||
LAB | −0.116 *** | 0.096 ** | 0.582 *** | 1 | |||
FDI | 0.355 *** | −0.087 ** | 0.292 *** | 0.596 *** | 1 | ||
GOV | 0.0330 | 0.145 *** | −0.509 *** | −0.278 *** | −0.235 *** | 1 | |
TRADE | −0.133 *** | 0.108 *** | −0.368 *** | −0.415 *** | −0.212 *** | 0.272 *** | 1 |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | |
---|---|---|---|---|---|---|---|
IFC | −0.275 *** | −0.314 *** | −0.267 *** | −0.267 *** | −0.291 *** | −0.287 *** | −0.218 ** |
(−2.97) | (−4.67) | (−3.32) | (−3.32) | (−3.43) | (−3.89) | (−2.72) | |
CAP | 0.452 *** | 0.379 *** | 0.379 *** | 0.387 *** | 0.540 *** | 0.563 *** | |
(7.21) | (6.58) | (6.58) | (6.99) | (7.10) | (7.40) | ||
LAB | 0.519 | 0.519 | 0.546 | −0.062 | 0.059 | ||
(1.57) | (1.57) | (1.55) | (−0.14) | (0.13) | |||
FDI | 0.007 | 0.010 | 0.010 | ||||
(0.87) | (1.20) | (1.14) | |||||
GOV | 0.589 *** | 0.618 *** | |||||
(3.49) | (3.44) | ||||||
TRADE | 0.003 * | ||||||
(1.78) | |||||||
Constant | −9.037 * | −0.688 | −6.975 | −6.975 | −7.813 | −4.462 | −7.432 |
(−1.70) | (−0.41) | (−1.50) | (−1.50) | (−1.55) | (−0.79) | (−1.32) | |
Country FE | yes | yes | yes | yes | yes | yes | yes |
Year FE | yes | yes | yes | yes | yes | yes | yes |
Number of id | 38 | 37 | 37 | 37 | 37 | 36 | 36 |
Observations | 574 | 558 | 558 | 558 | 504 | 477 | 477 |
R-squared | 0.3 | 0.4 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | |
---|---|---|---|---|---|---|---|---|
Starting a Business | Dealing with Construction Permits | Getting Electricity | Registering Property | Paying Taxes | Trading Across Borders | Enforcing Contracts | Resolving Insolvency | |
IFC | −0.094 *** | −0.062 | 0.041 | −0.188 ** | 0.071 | 0.054 | 0.203 | −0.150 * |
(−2.89) | (−0.65) | (1.30) | (−2.69) | (0.92) | (0.35) | (1.18) | (−2.00) | |
CAP | 0.610 *** | 0.463 *** | 0.509 *** | 0.502 *** | 0.665 *** | 0.580 ** | 0.608 *** | 0.594 *** |
(7.19) | (9.62) | (6.79) | (7.57) | (5.21) | (2.69) | (6.36) | (6.40) | |
LAB | −0.080 | 0.056 | −0.694 ** | 0.191 | 0.798 | 0.496 | 0.272 | 0.161 |
(−0.17) | (0.16) | (−2.39) | (0.52) | (1.57) | (0.98) | (0.62) | (0.37) | |
FDI | 0.009 | −0.004 | −0.004 | −0.001 | −0.000 | 0.007 | 0.007 | 0.008 |
(1.08) | (−0.66) | (−0.74) | (−0.08) | (−0.07) | (0.75) | (0.80) | (0.90) | |
GOV | 0.593 *** | 0.404 *** | 0.151 | 0.502 *** | −0.438 | −0.289 | 0.648 *** | 0.657 *** |
(3.03) | (2.78) | (1.32) | (3.39) | (−1.34) | (−1.10) | (3.23) | (3.19) | |
TRADE | 0.003 ** | 0.001 | −0.001 | 0.001 | 0.001 | −0.002 | 0.004 *** | 0.003 * |
(2.30) | (0.62) | (−0.89) | (0.70) | (0.41) | (−0.68) | (2.94) | (1.96) | |
Constant | −6.926 | −4.004 | 7.141 | −7.209 | −18.857 *** | −12.570 ** | −13.475 ** | −10.154 * |
(−1.18) | (−0.82) | (1.59) | (−1.47) | (−3.06) | (−2.69) | (−2.45) | (−1.79) | |
Country FE | yes | yes | yes | yes | yes | yes | yes | yes |
Year FE | yes | yes | yes | yes | yes | yes | yes | yes |
Number of id | 36 | 36 | 36 | 36 | 35 | 22 | 36 | 36 |
Observations | 477 | 421 | 302 | 451 | 121 | 98 | 477 | 477 |
R-squared | 0.5 | 0.4 | 0.3 | 0.5 | 0.5 | 0.4 | 0.5 | 0.5 |
Income Level | Government Effectiveness Index | |||
---|---|---|---|---|
(1) | (2) | (3) | (4) | |
IFC | −0.298 | −0.152 *** | −0.339 *** | −0.0454 |
(0.343) | (0.0384) | (0.0630) | (0.0463) | |
CAP | −0.0241 | 0.540 *** | 0.785 *** | 0.455 *** |
(0.259) | (0.0444) | (0.0707) | (0.0560) | |
LAB | 0.0249 | 0.369 ** | −1.171 *** | 0.966 *** |
(0.566) | (0.172) | (0.288) | (0.178) | |
FDI | 0.347 *** | 0.00556 | 0.0111 | 0.00745 |
(0.0833) | (0.00735) | (0.0144) | (0.00794) | |
GOV | −0.0440 | 0.553 *** | 1.537 *** | 0.347 *** |
(0.246) | (0.0854) | (0.192) | (0.0843) | |
TRADE | −0.0133 *** | 0.00433 *** | 0.00172 * | 0.00316 *** |
(0.00285) | (0.000675) | (0.00103) | (0.000833) | |
Constant | 3.315 | −11.36 *** | 2.824 | −17.81 *** |
(8.158) | (2.286) | (3.845) | (2.324) | |
Country FE | yes | yes | yes | yes |
Year FE | yes | yes | yes | yes |
Number of id | 4 | 32 | 13 | 22 |
Observations | 46 | 431 | 171 | 294 |
R-squared | 0.8 | 0.5 | 0.6 | 0.6 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
IFC | −0.218 *** | −1.079 *** | −1.079 *** | −1.079 *** |
(-2.79) | (−17.47) | (−17.47) | (−17.47) | |
CAP | 0.577 *** | −0.057 *** | −0.057 *** | −0.057 *** |
(6.72) | (−5.75) | (−5.75) | (−5.75) | |
LAB | 0.025 | −0.162 *** | −0.162 *** | −0.162 *** |
(0.05) | (−7.13) | (−7.13) | (−7.13) | |
FDI | 0.013 | 0.261 *** | 0.261 *** | 0.261 *** |
(1.39) | (14.17) | (14.17) | (14.17) | |
GOV | 0.665 *** | 0.199 ** | 0.199 ** | 0.199 ** |
(3.73) | (2.17) | (2.17) | (2.17) | |
TRADE | 0.003 * | −0.004 *** | −0.004 *** | −0.004 *** |
(1.95) | (−8.65) | (−8.65) | (−8.65) | |
Constant | −7.524 | 11.276 *** | 11.298 *** | 11.298 *** |
(−1.33) | (19.11) | (19.60) | (19.60) | |
Country FE | no | yes | yes | yes |
Year FE | no | yes | yes | yes |
Number of id | 36 | 36 | 36 | 36 |
Observations | 477 | 477 | 477 | 477 |
R-squared | 0.5 | 0.6 | 0.6 | 0.6 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
IFC | −0.978 *** | −0.978 *** | −0.978 *** | −0.978 *** |
(−15.25) | (−15.25) | (−16.27) | (−16.27) | |
CAP | −0.055 *** | −0.055 *** | −0.055 *** | −0.055 *** |
(−5.07) | (−5.07) | (−5.00) | (−5.00) | |
LAB | −0.174 *** | −0.174 *** | −0.174 *** | −0.174 *** |
(−7.62) | (−7.62) | (−6.28) | (−6.28) | |
FDI | 0.242 *** | 0.242 *** | 0.242 *** | 0.242 *** |
(15.14) | (15.14) | (10.17) | (10.17) | |
GOV | 0.221 ** | 0.221 ** | 0.221 ** | 0.221 ** |
(2.54) | (2.54) | (2.21) | (2.21) | |
TRADE | −0.004 *** | −0.004 *** | −0.004 *** | −0.004 *** |
(−7.09) | (−7.09) | (−8.24) | (−8.24) | |
Constant | 11.440 *** | 11.440 *** | 11.440 *** | 11.440 *** |
(20.20) | (20.20) | (17.94) | (17.94) | |
Country FE | yes | yes | yes | yes |
Year FE | yes | yes | yes | yes |
Number of id | 36 | 36 | 36 | 36 |
Observations | 448 | 448 | 448 | 448 |
R-squared | 0.6 | 0.6 | 0.6 | 0.6 |
Entrepreneurial Intention | Established Business Ownership | |||||
---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | |
IFC | −0.407 *** | −5.136 *** | −0.243 *** | −0.407 *** | −0.301 *** | −0.244 *** |
(−10.28) | (−3.44) | (−4.94) | (−10.28) | (−2.76) | (−4.94) | |
APS4 | 0.006 *** | |||||
(3.02) | ||||||
APS6 | 0.063 *** | |||||
(2.59) | ||||||
Constant | 7.801 *** | −53.313 ** | 9.439 *** | 7.801 *** | 1.446 | 8.841 *** |
(7.44) | (−2.51) | (8.58) | (7.44) | (1.09) | (8.00) | |
Country FE | yes | yes | yes | yes | yes | yes |
Year FE | yes | yes | yes | yes | yes | yes |
Number of id | 36 | 34 | 34 | 36 | 34 | 34 |
Observations | 477 | 318 | 318 | 477 | 318 | 318 |
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Zhou, Q.; Yu, D.; Xu, F.; Sun, J. The Impact of Institutional Friction Cost on Economic Growth: Evidence from OECD Countries. Sustainability 2023, 15, 427. https://doi.org/10.3390/su15010427
Zhou Q, Yu D, Xu F, Sun J. The Impact of Institutional Friction Cost on Economic Growth: Evidence from OECD Countries. Sustainability. 2023; 15(1):427. https://doi.org/10.3390/su15010427
Chicago/Turabian StyleZhou, Qingjie, Dongyao Yu, Feng Xu, and Jiamin Sun. 2023. "The Impact of Institutional Friction Cost on Economic Growth: Evidence from OECD Countries" Sustainability 15, no. 1: 427. https://doi.org/10.3390/su15010427
APA StyleZhou, Q., Yu, D., Xu, F., & Sun, J. (2023). The Impact of Institutional Friction Cost on Economic Growth: Evidence from OECD Countries. Sustainability, 15(1), 427. https://doi.org/10.3390/su15010427