The Effect of Institutional Factors on Economic Growth in D8

There are several factors affecting economic growth. Identifying the main factors that influence the rate of economic growth is a controversial issue. In this respect, the institutional economists have considered the relationship between people and conflicts in human relations. Institutions by establishing a stable structure for human relations lead to reduce uncertainty in markets which reduce commercial transactions costs and increase competitiveness. This paper aims to examine the role of institutional factors on economic growth using endogenous growth models. The data employed to estimate empirical models cover the period from 2009 to 1995. According to the results of estimates, D8 countries do not have endogenous mechanisms for the internal research and development activities. External research and development spillovers have statistically significant and positive effect on economic growth. The interaction between spillovers external research and development and institutional factors such as the improvement of doing business and the quality of education as well as the observance of patent have statistically significant and positive effect on economic growth in D8 countries.