Do Institutions Influence Economic Growth?

Economic growth has been the subject of much focus throughout the history of economicthought as it has profound economic, social and political consequences. The sourcesof economic cycles are surrounded by intense and controversial scientific dispute. In ourarticle, we want to contribute to the institutional economics debate by analysing selectedinstitutional factors and testing their influence on economic growth. On a 2012–2018dataset, we prove that soft factors such as property rights, freedom of corruption, levelof freedom on different markets and other components of the Index of Economic Freedomand legal framework explain the differences in GDP per capita dynamics across countries.We present new evidence on how institutional factors determine economic growth. Unlikepreviously conducted studies, we use panel data and a set of general control variablesin an attempt to respect causal inference. Moreover, we show that the mainstreameconomic conviction – more economic freedom leads to higher economic growth – failsin some cases, and regulation does not always hamper economic growth.