Institutional factors as determinants of subnational economic growth in Ecuador
Keywords:
heterogeneidades económicas, regional, calidad institucional, ingreso per cápita, EcuadorAbstract
Ecuador is a developing country with great economic heterogeneity at the regional level. The objective of the study is to analyze the importance of institutional quality as determinants of subnational per capita income in Ecuador. The positive effect of institutions on economic growth at the national level has been demonstrated. However, studies that analyze institutions as determinants of regional growth for developing countries are still scarce. The study uses the Latinobarómetro surveys for 2007-2018 to obtain information on the perception of institutional quality and follows the methodology of the World Governance Indicators of the World Bank to analyze three dimensions of governance: voice and accountability, effectiveness of the government and rule of law. The empirical analysis is done with a panel data regression model and counterfactual exercises. The results indicate that the improvement of institutional quality is associated with increases in the regional income level, after controlling for factors such as human capital, infrastructure and capital stock. However, the analysis reveals that institutions only explain a moderate part of the regional differences in per capita income. From a policy point of view, the analysis suggests the need to consider strengthening institutional quality as a strategy that can complement and enhance the effects of other instruments that seek to promote regional economic growth.
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