Institutional Governance, Population Dynamics, and Economic Growth: Insights from a Global Panel

Abstract

This study aims to examine the correlation between institutional governance and economic growth across a panel of 91 countries from 1999 to 2014. Using both Random Effect Model and System GMM, we assess the direct influence of governance using an institutional governance index. Additionally, we investigate the complementary nature of institutions by analyzing their interaction with population dynamics, represented by an interaction variable of population and governance index. By employing rigorous statistical methods, including Random Effect Model and System GMM, we aim to provide robust insights into the relationship between institutional governance and economic growth. The institutional governance index serves as a comprehensive measure of the quality and effectiveness of governance within each country, allowing us to evaluate its direct impact on economic growth. Furthermore, by examining the interaction between institutional governance and population dynamics, we seek to understand how population size influences the relationship between governance quality and economic growth. This analysis sheds light on the nuanced interplay between governance institutions and demographic factors, providing valuable insights for policymakers and researchers alike. Our study reveals compelling insights into the relationship between institutional governance, population dynamics, and economic growth across the panel of countries examined. Firstly, we find that institutional governance exerts a direct and statistically significant influence on economic growth, underscoring the pivotal role of effective governance structures in fostering economic prosperity. Furthermore, our analysis uncovers an indirect impact of institutional governance on economic growth mediated through population dynamics. While the direct impact of population on economic growth appears negative and significant, we observe a noteworthy shift when institutional governance interacts with population dynamics. In this context, the relationship between population dynamics and economic growth becomes positive and significant, suggesting that effective governance mechanisms can mitigate the adverse effects of population growth on economic performance. These findings emphasize the critical importance of institutional governance in driving sustainable economic development. By promoting transparent, accountable, and inclusive governance practices, policymakers can create an environment conducive to investment, innovation, and economic growth. Moreover, our results highlight the nuanced interplay between governance structures and demographic factors, offering valuable insights for policymakers seeking to address challenges related to population growth and economic development. Our study contributes to a deeper understanding of the complex dynamics shaping economic growth, with implications for policy formulation and implementation. By recognizing the central role of institutional governance and its interaction with population dynamics, policymakers can devise strategies to promote inclusive and sustainable development, ultimately leading to improved living standards and enhanced well-being for citizens across the globe.