Institutions and Economic Performance: A Review on the Developing Countries

Abstract

The aim of this study is to analyze the relationship between institutions and macro-economic performance in terms of developing countries. For this purpose, for a period covering the years 2000-2011 through the use of 23 institutional structure variables in the study, the relationship between the institutional structure and macro-economic performance is investigated in sampling countries where 38 developing countries take place by using the ‘Panel Data Analysis’ method. The results of the analysis reveals that institutional structure indicators such as the integrity of the law system, regulations on trade barriers, restriction of foreign investments, the share of the private sector in the banking system and employment-dismissal variables have a positive effect on the macro-economic performance of the developing countries. On the other hand, according to the analysis results, variables such as judiciary independence, government expenditures, transfers and subsidies, civil freedoms, the black market exchange rate, collective bargaining and military tutelage (political stability) have been seen to have a negative impact on the macro-economic performances of developing countries.