Institutional Quality and Income: Panel Data Analysis

In this study, the impact of institutional quality on income is examined by panel ols by using 1996-2012 period data for 122 countries. the empirical findings yield three striking results. firstly, there is a positive and statistically significant relationship between institutional quality and income. secondly, it is found that the impact of institutional quality on income differs among groups of countries. while the effect of institutional quality on income is high in magnitude in european and sub-saharan countries, it is low in latin and north america and east and south east asia countries. thirdly, in those countries which have substantially completed and have newly started its economic development, the impact of institutional quality on income is higher. hence, less developed countries should focus on legal arrangements and business freedom in order to reduce corruption and secure property rights.