Institution, Governance, and Economic Growth

The neo-classical growth models explain the difference between economic growth of economies as a result of difference in economic factors such as capital (in the form of fiscal and human) and factor productivity, but according to new institutional economist those differences in fact originate from institutional qualities and structures in different countries. In this regard, the main reason of having low level of per capita income in less developed countries is the lack of good quality institutions for economic activities and capital accumulation.Researches show the positive impacts of institutions on economic growth in different economies. In this study, we investigate evaluate the effects of institutional qualities and other economic factors on economic growth in 50 countries for the period of 1996 - to 2005. Institutional quality is formed by combination of six basic indices as followes: voice and accountibility, political stability, control of corruption, rule of law, regulatory of quality, and government effectiveness. The results show athe direct relationship between economic growth and institutional qualities.