What matters for growth in Europe? Institutions versus policies, quality versus instability

Research output: Contribution to journalArticle

Abstract

We study how the quality and instability of institutions and policies affect economic growth in 35 European countries. While stability entails valuable predictability, instability can reflect reforms that offer positive long-run consequences. We construct measures of quality and instability for a panel of countries for 1984-2009. Results suggest that the quality of policy is growth-promoting. Notably, this positive effect becomes larger the more unstable policies are. The findings suggest that for European countries, the benefits of policy flexibility - due to experimentation and learning or making rent seeking more difficult - dominate the costs of reduced predictability.

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Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics

Keywords

  • policies, Europe, reforms, institutional change, institutions, growth, instability, O11, B52, O43, O17, D80
Original languageEnglish
Pages (from-to)69-88
JournalJournal of Economic Policy Reform
Volume18
Issue number1
StatePublished - 2015
Publication categoryResearch
Peer-reviewedYes