Hossein Mohammadi; Alireza Sani Heidary
Abstract
Expended Abstract:
Introduction
In the last decades, economic growth is one of the important issues among researchers because economic growth rate is one of the important factors in investigating the performance of different countries' economic policies. So, an investigation of influencing ...
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Expended Abstract:
Introduction
In the last decades, economic growth is one of the important issues among researchers because economic growth rate is one of the important factors in investigating the performance of different countries' economic policies. So, an investigation of influencing factors on economic growth is necessary. Entrepreneurship can significantly impact economic growth by creating innovation, design, diversity of product production, and increasing the efficiency and competition of firms, and also higher economic growth will also increase the incentive of innovation and knowledge for entrepreneurs. Also, countries that are on the path to economic growth lead to motivating entrepreneurs innovation and knowledge. As a result, economic growth can affect creating entrepreneurship. Therefore, economic growth and entrepreneurship are recognized as two essential components in economic. In recent economic theories, institutional factors are influential in assessing the relationship between economic growth and entrepreneurship. Therefore, this research seeks to investigate the interaction effects between entrepreneurship and economic growth, emphasizing the quality of institutional factors using the simultaneous equation model and panel data for the OECD and OPEC in the 2000-2016 periods.
Theoretical Framework
Entrepreneurship is a purposeful activity to create, maintain, and develop profitable businesses. These entrepreneurial activities can be considered three sections: 1) Total entrepreneurial activities; 2) Opportunity for entrepreneurial activities; 3) The need for entrepreneurial activities. The combination of these three components creates a new index called global entrepreneurship. From the perspective of the institutionalism approach, the environment shaping the economy affects entrepreneurship dynamics within each country. This environment is known through interdependencies between growth, economic development, and institutions. Entrepreneurs are the main perpetrators of change that react to unplanned stimuli within the institutional framework.
Methodology
The present study seeks to assess the interactions between entrepreneurship and economic growth and its relation with institutional quality using the simultaneous equation approach in panel data for two groups of OECD and OPEC countries during the period 2000-2016. The two groups of OECD and OPEC countries differ significantly in terms of economic structure. So the results may be different for them. The selection of these two groups of countries can help obtain actual results of the relationship between entrepreneurship and economic growth and the role of institutional quality on them. Many studies have shown that there are two-way feedback effects between economic growth and entrepreneurship. This feedback on both sides leads to the bias results in the traditional regression. Therefore, in such cases, the system of simultaneous equations is used. In this research, instrumental variables (IV) and generalized method of moments (GMM) methods are used to estimate the equations. The explanatory variables for the economic growth equation are entrepreneurial index, institutional quality index, life expectancy, total government expenditures, fixed capital formation, and labor force growth. The explanatory variables for the entrepreneurship index equation are economic growth, the number of formal stages of starting a business, trust in ability and skill, and institutional quality index.
Results and Discussion
The results indicate that the variables of economic growth and entrepreneurship have a positive and significant effect on each other, and also the institutional quality variable also has a positive effect on the relationship between the two components. Also, for the OECD countries, the variables of life expectancy, the growth rate of fixed capital formation, and the labor productivity growth have a positive effect, and the total government expenditures hurt economic growth. For the OPEC countries, labor force growth has a positive effect, and total government expenditure has a negative effect on economic growth.
Conclusion and Suggestions
This research seeks to assess the interaction between entrepreneurship and economic growth with an emphasis on institutional quality. Based on the empirical findings, economic growth and entrepreneurship variables have a positive and significant effect on each other, and the institutional quality variable also has a positive effect on the relationship between the two components. According to the results, encouraging entrepreneurship, the growth of the real private sector in the economy, and the reduction of business start-ups to increase economic growth are recommended.
ali ahmadpourkacho; nazar dahmardeh
Abstract
Extended AbstractIntroductionToday, it is believable for the majority of economists that both physical and human capital accumulation and technological changes are unable to fully explain the difference of economic growth rates between countries. What which mentioned recently as the main key for ...
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Extended AbstractIntroductionToday, it is believable for the majority of economists that both physical and human capital accumulation and technological changes are unable to fully explain the difference of economic growth rates between countries. What which mentioned recently as the main key for economic growth in the literature are institutional quality and financial development. The particular importance of institutional and financial structure in economic growth has been at the frontier of research for recent decades. Various studies have emphasized the critical role of institutional quality reform in financial and economic development since it provides the necessary base for more efficient allocation of financial resources. Regarding institutional quality, it is an essential and necessary condition to enhance financial development, so in this context, suitable policies are demanded. Good governance improves the allocation of resources and increases the impact of financial development on growth. In other words, the effectiveness of financial development in order to achieve economic growth increases with the improvement of governance. MethodologyThe main aim of this paper is to study the effects of financial development and institutional quality on economic growth for the case of 27 member countries of Economic Development and Cooperation Organization (OECD) in 2002-2014, using Dynamic Panel Data analyses. In this paper, we used a weighted average of six indicators of accountability and accountability, political stability and lack of violence, government efficiency, order and regulation quality, rule of law and corruption control as an institutional indicator, and a weighted average of 18 variables, extracted from the World Bank, for the combined financial-financial development index. Statistical data of the variables, GDP to labor ratio, financial development indicators, gross fixed capital formation and work-force growth rate have been extracted from the World Development Index (WDI), and institutional quality indicators have been extracted from Worldwide Governance Indicators (WGI).Results and Discussion Institutional quality is another important factor affecting economic growth, and its significant positive coefficient suggests that institutional quality is one of the key variables that influences the economic growth of OECD member countries. The significant positive effect of institutional quality on the economic growth of OECD member countries is in accordance with the theoretical and empirical results of studies on these countries; because these counties have high ratings in institutional variables such as the quality of bureaucracy, the right to comment and responsivity and rule of law, which that highlight their improved judicial system, executive system and civil liberties and hence the institutional quality. The coefficient of the variable of financial development index in the estimating models shows that the weighted average of financial development indicators has a significant positive effect on the economic growth of OECD member countries. By reducing transaction costs and accessing information, the financial sector has led to equipped savings and facilitated funding. This, in turn, has resulted in higher investment and faster economic growth. This result is consistent with theoretical foundations (supply-side view) of financial development and economic growth. This positive effect indicates that the economies of OECD countries have the necessities and benefits of favorable financial markets that respond to the needs of the economy, including the goals of liberalization, privatization and balance and development, and in this regard, yields many favorable and preemptive effects for different sectors of the economy. Part of these favorable effects of financial markets, and in particular the capital market, stems from the efficient functioning of financial institutions in the financial markets of OECD countries, and the other huge part stems from the environment of the economy, and economic-social and cultural-legal structures of these countries. Accordingly, the interactive effect of financial development and institutional quality has been inserted into the model to measure the efficiency of financial development in the shadow of institutional quality on the economic growth of OECD member countries. The coefficient of the interactive effect of financial development and institutional quality also indicates the significant positive effect of financial development on the economic growth of OECD member countries. Conclusions & SuggestionsThe findings of this paper showes that financial development and institutional quality have significant positive effects on the economic growth of OECD member countries, which is in line with the expected theory in Economic Growth. Also, the interactive effect of financial and institutional development showes that in developed countries due to proper institutional structure, financial development improves economic growth. According to our results, in the case that countries want to make major changes in their economic growth, they need to address institutional reforms in different sectors. Therefore, in order to facilitate economic activities and achieve economic progress, the policy makers of the studied countries must have a simultaneous attitude toward the economy and politics, and make their policy with the presumption that two factors, financial development and institutional quality, reinforce each other and have a positive impact on economic growth.
Mohammad Heidari; Vahid Moghaddam; Iman Bastani far; Ahmad Mehrshad
Abstract
Institutionalism is an interdisciplinary approach which applies disciplines as psychology, sociology, anthropology and law to explore economic agents' behavior and provide more accurate presumptions to explain their behavior. Evaluating the institutions can provide an appropriate environment to adopt ...
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Institutionalism is an interdisciplinary approach which applies disciplines as psychology, sociology, anthropology and law to explore economic agents' behavior and provide more accurate presumptions to explain their behavior. Evaluating the institutions can provide an appropriate environment to adopt solutions based on cooperation which result in fastening changes toward economic growth. Institutional economics emphasizes the central role of institutions in development. New institutional economics is an attempt to combine the theory of institutions in the economy. Considering the role of institutions enables the policy makers and planners to know the elements and components of the social system in order to explore the position of economic components and plan to facilitate the economic relations and reduce transaction costs. On the other hand, Iran's approach to economic development after the sacred defense, has been mostly the implementation of structural adjustment prescribed by the IMF. Accordingly, the lack of theoretical foundations and dependence on imported patterns are two key components of economic policy in Iran after the revolution. Institutional economics, regarding the crucial role of institutional environment has insightful implications for recognizing the role of the government in national economy. Institutionalists not only in market failure, but also in reforming the socio-economic and making the streams, give more role to the government in the development process. They emphasize more on the elements of transparency, efficiency and accountability of the government in relation to the size of the government and privatization. Williamson with a new approach, examines institutional economics in four levels of social analysis. He distinguishes these levels with different horizons of change, the priority of each one, and the underlying theories of each. This approach with regard to the institutional structure of the Iranian economy, enables us to investigate the role of oil and the government with more transparency and give policy recommendations to modify the prevailing situation. This paper based on the institutional role of oil in Iranian economy, gives a pathology of Iranian economy in viewpoint of institutional economics and explores the implications of this approach to improve the path to Iranian economic development. This paper applies the four-level model presented by Williamson to explore the role of oil in Iranian economy which implies in turn the rent seeking big government and the resulting fall in institutional quality. The paper also regarding the phenomenon of shortsightedness, expansion of underground economy, crowding out of productive factors, extension of bureaucracy and lack of property rights, proposes some ideas to provide the economy with an accountable government that recognizes and guarantees the property rights of economic agents to pave the way for an Islamic-Iranian model of progress which in turn facilitates the realization of the ideals of the Iranian constitution and the goals of the development (progress) vision. Finally, the paper concludes that the essential precondition of the progress in the rent seeking Iranian economy is the elimination of oil rent through a fundamental change of its institutional position. This is possible only through codification of the fundamental policies of article forty five of the constitution. This article states that Public wealth and property, such as uncultivated or abandoned land, mineral deposits, seas, lakes, rivers and other public water- ways, mountains, valleys, forests, marshlands, natural forests, unenclosed pastureland, legacies without heirs, property of undetermined ownership, and public property recovered from usurpers, shall be at the disposal of the Islamic government for it to utilize in accordance with the public interest. Law will specify detailed procedures for the utilization of each of the foregoing items. So, the article gives the authority of exploiting Anfal including oil and gas to the Islamic state. Codification of the fundamental polices of this article modifies the institutional role of oil and improves the role of the government. We found out that the framework for establishing those fundamental policies of article forty five should include Pattern of ownership, management, administration, operation and monitoring the distribution of the yields among different agents in the economy to guarantee the well-being of all especially the poor; furthermore, recognize and guarantee property rights (physical and intellectual), intra-generational and inter-generational regulations to achieve justice, implementation and monitoring (equality of opportunity, the share of qualified agents, the equitable distribution of resources and the like), establishment of maximum efficiency (allocative and technical) and effectiveness in all processes, formulation, implementation and monitoring indicators of operational protections (depletion rate optimal strategic allocation of assets and similar standards), development and ensuring environmental rights and other rightful, capture of resource rents by the government via the equity (tax and other receipts required) and depositing those revenues in the sovereign and autonomous national development fund to be invested in profitable activities and to use the benefits in the infrastructure of the Iranian economy and make a better business environment for the private sector to make the economic activities more competitive in relation to the world economy.
fatemeh khani; Mahmood Hoshmand
Abstract
Economic performance over time, is largely dependent on environmental policy, institutional and legal countries. Also nowadays development Industrial exports is known as the one of the best goals of economic development. The issue for many developing countries are often exporter of raw materials is important. ...
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Economic performance over time, is largely dependent on environmental policy, institutional and legal countries. Also nowadays development Industrial exports is known as the one of the best goals of economic development. The issue for many developing countries are often exporter of raw materials is important. Therefore, understanding the factors influencing industrial exports are necessary.
Hence, this study using panel data to investigate the impact of institutional quality on the export of industrial products for 14 samples from selected developing countries, between the years 2002 and 2012. In the paper than the average six indicators of good governance in the period under review as institutional index is used. In addition to the institutional index of two variables, GDP and real exchange rate countries were used as control variables.
The results confirm this hypothesis that improvements in institutional quality has a positive effect on the supply of industrial products export to countries in the study. And this study shows that to increase export supply in the countries In addition to removing financial barriers such as exchange rate should try special attention made to improving institutional quality.
