Institutional Quality and Economic Performance: A Study of Asian Countries

Abstract

The objective of this article is to investigate the influence of institutional quality on the economic performance of 47 Asian countries, categorized into four income levels (low-income, lower-middle-income, upper-middle-income and high-income countries) over the period 1981–2021. The study utilizes six governance indicators, and a composite governance index is constructed to evaluate institutional quality. Economic performance is assessed through three key indicators: real gross domestic product (GDP), real GDP per capita (GDPPC) and the human development index (HDI). Except for HDI data, all variable data were sourced from the World Bank, while HDI data were obtained from the UNDP. The study employed panel regression, panel co-integration techniques and the autoregressive distributed lag model. The findings indicate that governance indicators have a positive and significant impact on GDP, GDPPC and HDI in Asian countries. Moreover, the study reveals that the influence of governance indicators on economic performance is more pronounced in high-income countries compared to other income levels in Asia. Consequently, the research emphasizes the importance of focusing on governance indicators for fostering economic growth and enhancing HDI in Asian countries.