THE EFFECT OF GOVERNMENT EFFECTIVENESS AND RULE OF LAW ON ECONOMIC GROWTH: THE CASE OF EUROPEAN UNION TRANSITION ECONOMIES

Abstract

Government effectiveness can be effective on the country's economy through the political decision-making process and institutions. Legalization along with political decision-making process and institutions is also important for the countries. In a similar vein, the rule of law which is also important in terms of obeying the rules, may have effects on economy because of legal transactions. Therefore, it is important to analyse the effect of government effectiveness and the rule of law on the economy. In this study, the effect of government effectiveness and rule of law on economic growth for European Union transition economies was investigated by panel data analysis method over the period of 2002-2018. In the result of the study, it was concluded that government effectiveness had a positive effect on economic growth, but the rule of law had no statistically significant effect on economic growth. Moreover, the results indicate unidirectional causality from government effectiveness to economic growth and bidirectional causality from the rule of law and economic growth.

Keywords

• Institutional factors,Government Effectiveness,Rule of Law,Governance,Economic Growth,Transition economies

HÜKÜMET ETKİNLİĞİ VE HUKUKUN ÜSTÜNLÜĞÜNÜN EKONOMİK BÜYÜME ÜZERİNDEKİ ETKİSİ: AVRUPA BİRLİĞİ GEÇİŞ EKONOMİLERİ ÖRNEĞİ

Abstract

Hükümet etkinliği, ülke ekonomisi üzerinde politik karar alma süreci ve kurumlar aracılığıyla etkili olabilmektedir. Politik karar alma süreci ve kurumlar ile birlikte yasallaşma da ülke ekonomisi açısından önem taşımaktadır. Kurallara uyma açısından önemli olan hukukun üstünlüğü, ekonomi üzerinde işlemlerin yasal olması nedeniyle etkiler oluşturabilmektedir. Bu nedenle hükümet etkinliği ile hukukun üstünlüğünün ekonomi üzerindeki etkisini incelemek önem arz etmektedir. Bu çalışmada panel veri analizi yöntemi kullanılarak 2002-2018 yılları arasında Avrupa Birliği geçiş ekonomilerinde (11 ülkede) hükümet etkinliği ile hukukun üstünlüğünün ekonomik büyüme üzerindeki etkisi incelenmiştir. Yapılan çalışma sonucunda, hükümet etkinliğinin ekonomik büyümeyi pozitif, hukukun üstünlüğünün ise ekonomik büyüme üzerinde istatistiksel olarak anlamlı bir etkisinin olmadığı tespit edilmiştir. Ayrıca hükümet etkinliğinden ekonomik büyümeye doğru tek yönlü, hukukun üstünlüğü ile ekonomik büyüme arasında çift yönlü nedensellik ilişkisi tespit edilmiştir.

Keywords

• Kurumsal Faktörler,Hükümet Etkinliği,Hukukun Üstünlüğü,Ekonomik Büyüme

References

1. Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91(5), 1369-1401.
2. Acemoglu, D., & Robinson, J. A. (2010). The role of institutions in growth and development. Review of Economics and Institutions, 1(2), 1-33. http://dx.doi.org/10.5202/rei.v1i2.14.
3. Aktan, C. C., & Vural T. (2005). Kurumsal iktisat: Kurallar, Kurumlar ve Ekonomik Gelişme. In C. C. Aktan (Ed.), Eski Kurumsal İktisat (pp. 7-20), Sermaye Piyasası Kurulu Kurumsal Araştırmalar Serisi No. 2, Ankara.
4. Alam, M. R., Kitenge, E., & Bizuayehu, B. (2017). Government Effectiveness and Economic Growth. Economic Bulletin, 37(1), 222-227.
5. Baltagi, B. H., Feng Q., & Kao, C. (2012). A Lagrange Multiplier Test for Cross-Sectional Dependence in A Fixed Effects Panel Data Model. Journal of Econometrics, 170(1), 164-177. https://doi.org/10.1016/j.jeconom .2012.04.004.
6. Barro, R. J. (1990). Government Spending in a Simple Model of Endogenous Growth. Journal of Political Economy, 98(5), 103-125. https://doi.org/10.1086/261726.
7. Barro, R. J. (1991). Economic Growth in a Cross Section of Countries. Quarterly Journal of Economics, 106(2), 407-444.
8. Barro, R. J. (1996). Determinants of Economic Growth: A Cross-Country Empirical Study. National Bureau of Economic Research Working Paper, No. 5698, 1-79.

9. Barro, R. J. (2000). Index of Economic Freedom. In O'driscoll, G.P., Holmes, K.R., & O’Grady, M.A. (Eds.), Rule of Law, Democracy and Economic Performance (pp. 31-51), Heritage Foundation, Washington.
10. Breusch, T.S., & Pagan, A.R. (1980). The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239-253. https://doi.org/10.2307/2297111.
11. Chong, A., & Calderon, C. (2000). Causality and Feedback Between Institutional Measures and Economic Growth. Economics and Politics, 12(1), 69-81.
12. Dawson, J. W. (2003). Causality in the freedom–growth relationship. European Journal of Political Economy, 19(3), 479-495. https://doi.org/10.1016/S0176-2680(03)00009-0.
13. Dumludağ, D. (2014). Kalkınmada Yeni Yaklaşımlar. In Aysan, A.F., & Dumludağ, D. (Eds.), Kurumlar, Kurumsal Değişim ve Ekonomik Kalkınma (pp.15-36), İmge Kitapevi, Ankara.
14. Emirmahmutoğlu, F., & Köse, N. (2011). Testing for granger causality in heterogeneous mixed panels. Economic Modelling, 28(3), 870-876. https://doi.org/10.1016/j.econmod. 2010.10.018
15. Erdoğan, S., & Canbay, Ş. (2016). İktisadi Büyüme-Araştırma ve Geliştirme (Ar-Ge) Harcamaları İlişkisi Üzerine Teorik Bir Inceleme. Anemon Muş Alparslan Üniversitesi Sosyal Bilimler Dergisi, 4(2), 29-43. https://doi.org/ 10.18506/anemon.258538.
16. Fayissa, B., & Nsiah, C. (2013). The Impact of Governance on Economic Growth in Africa. The Journal of Developing Areas, 47(1), 91-108.
17. Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2004). Do Institutions Cause Growth?. Journal of Economic Growth, 9(3), 271-303.
18. Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37(3), 424-438.
19. Grogan, L., & Moers, L. (2001). Growth Empirics with Institutional Measures for Transition Countries. Economic Systems, 25(4), 323-344.
20. Güney, T. (2017). Hükümet Etkinliği ve Ekonomik Büyüme Ilişkisi. International Review of Economics and Management, 5(4), 42-55. https://doi.org/ 10.18825/iremjournal.335671.
21. Huang, C. J., & Ho, Y. H. (2017). Governance and Economic Growth in Asia. The North American Journal of Economics and Finance, 39, 260-272. https://doi.org/10.1016/ j.najef.2016.10.010
22. Justesen, M. K. (2008). The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970–1999. European Journal of Political Economy, 24(3), 642-660. https://doi.org/10.1016/j.ejpoleco .2008.06.003.
23. Kama, Ö. (2011). Yeni Kurumsal Iktisat Okulunun Temelleri. Gazi University Journal of Economics and Administrative Sciences, 13(2), 183-204.
24. Khan, M. H. (2007). Governance, Economic Growth and Development since the 1960s. DESA Working Paper No. 54, 1-22.
25. Knack, S., & Keefer, P. (1995). Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures. Economics and Politics, 7(3), 207–227.
26. Kurtz, M., & Schrank, A. (2007). Growth and Governance: Models, Measures and Mechanisms. Journal of Politics, 69(2), 538–554. https://doi.org/10.1111/j.1468-2508.2007. 00549.x.
27. Law, S. H., & Bany-Ariffin, A. N. (2008). Institutional infrastructure and economic performance: Dynamic panel data evidence. Transition Studies Review, 15(3), 542-557. https://doi.org/10.1007/s11300-008-0026-1.
28. Lee, K., & Kim, B. Y. (2009). Both Institutions and Policies Matter but Differently for Different Income Groups of Countries: Determinants of Long-Run Economic Growth Revisited. World Development, 37(3), 533-549. https://doi.org/10.1016/j.worlddev. 2008.07.004.
29. McCoskey, S., & Kao, C. (2007). A residual-based test of the null of cointegration in panel data. Econometric Reviews, 17(1), 57–84. https://doi.org/10.1080/07474939808800403.
30. Mehanna, R. A., Yazbeck, Y., & Sarieddine, L. (2009). Governance and Economic Development in MENA Countries: Does Oil Affect the Presence of a Virtuous Circle?. Journal of Transnational Management, 15(2), 117-150. https://doi.org/10.1080/15475778.2010.481250
31. North, D.C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press, Cambridge, USA.
32. North, D. C. (1991). Institutions. Journal of Economic Perspectives, 5(1), p.97-112. Ollila, P. (2009). Principles of Institutional Economics: with Applications to Cooperative Enterprises. Helsinki University Department of Economics Working Papers. No 56, 1-70.
33. Pedroni, P. (2000). Fully Modified OLS for Heterogeneous Cointegrated Panels. Advances in Econometrics, 15, 93-130.
34. Pesaran, M.H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels. Cesifo Working Paper, No. 1229, 1-40.
35. Pesaran, M.H. (2007). A simple panel unit root test in the presence of cross section dependence. Journal of Applied Econometrics, 22(2), 265-312. https://doi.org/10.1002/jae.951.
36. Pesaran, M.H., Ullah, A., & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. The Econometrics Journal, 11(1), 105-127. https://doi.org/10.1111/j.1368-423X.2007.00227.x.
37. Pesaran, M.H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50-93. https://doi.org/10.1016/j.jeconom.2007.05.010.
38. Quibria, M.G. (2006). Does Governance Matter? Yes, No or Maybe: Some Evidence from Developing Asia. Kyklos, 59(1), 99–114. https://doi.org/10.1111/j.1467-6435.2006.00322.x.
39. Toda, H.Y., & Yamamoto, T. (1995). Statistical inferences in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1), 225‐250. https://doi.org/10.1016/0304-4076(94)01616-8.
40. United Nations (2016). World Economic and Social Survey 2014/2015 Learning from National Policies Supporting MDG Implementation, Department of Economic and Social Affairs, Retrieved October 28, 2018, from http://www.un.org/en/development/desa/policy/wess/wessarchive/2015wessfullen.pdf.
41. Westerlund, J., & Edgerton, E. (2007). A Panel Bootstrap Cointegration Test. Economics Letters, 97(3), 185-190. https://doi.org/10.1016/j.econlet.2007.03.003.
42. World Bank (2020a). Government effectiveness: Estimate. Retrieved February 26, 2020, from https:// https://datacatalog.worldbank.org/government-effectiveness-estimate-0.
43. World Bank (2020b). Rule of Law. World Bank Data Catalog. Retrieved February 26, 2020 from https:// https://databank.worldbank.org/databases/rule-of-law.
44. World Bank (2020c). World Bank National Accounts Data. Retrieved February 26, 2020 from http:// https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG.