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Both sides of the institutions and growth debate have resorted largely to microeconometric techniques in testing hypotheses. In this paper, I build a panel structural vector autoregression (SVAR) model for a short panel of 119 countries over 10 years and find support for the institutions hypothesis. Controlling for individual fixed effects, I find that exogenous shocks to a proxy for institutional quality have a positive and statistically significant effect on GDP per capita. On average, a 1 percent shock in institutional quality leads to a peak 1.7 percent increase in GDP per capita after six years. Results are robust to using a different proxy for institutional quality. There are different dynamics for advanced economies and developing countries. This suggests diminishing returns to institutional quality improvements.

Economic development --- Institutions (Philosophy) --- Philosophy --- Econometric models. --- Econometrics --- Macroeconomics --- Institutions and Growth --- Multiple or Simultaneous Equation Models: Models with Panel Data --- Semiparametric and Nonparametric Methods --- Estimation --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Personal Income, Wealth, and Their Distributions --- Econometrics & economic statistics --- Estimation techniques --- Vector autoregression --- Structural vector autoregression --- Personal income --- Econometric analysis --- National accounts --- Econometric models --- Income --- United States

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This paper assesses the real effects of the energy reform in Mexico by looking at its impact on manufacturing output through changes in energy prices. Using sub-sector and state-level manufacturing output data, along with past variation in energy prices, we find electricity prices––relative to oil and gas––to be more important in the manufacturing process, with a one standard deviation reduction in electricity prices leading to a 2.8 percent increase in manufacturing output. Our estimated elasticities together with plausible reductions in electricity tariffs derived from the energy reform, could increase manufacturing output by up to 3.6 percent, and overall real GDP by 0.6 percent. Larger reductions are possible over the long run if increased efficiency in the sector leads electricity prices to converge to U.S. levels. Moreover, including the impact of lower electricity tariffs on the services sector, could lead to significantly larger effects on GDP. Accounting for endogeneity of unit labor costs in a panel VAR setting leads to an additional indirect channel which amplifies the impact of electricity prices on output.

Energy policy --- Power resources --- Industrial capacity --- Manufacturing industries --- Capacity, Industrial --- Manufacturing capacity --- Production capacity --- Manufactures --- Energy --- Energy resources --- Power supply --- Natural resources --- Energy harvesting --- Energy industries --- Prices --- Investments: Energy --- Macroeconomics --- Industries: Energy --- Industries: Manufacturing --- Semiparametric and Nonparametric Methods --- Multiple or Simultaneous Equation Models: Cross-Sectional Models --- Spatial Models --- Treatment Effect Models --- Multiple or Simultaneous Equation Models: Models with Panel Data --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Studies of Particular Policy Episodes --- Energy: Demand and Supply --- Electric Utilities --- Industry Studies: Manufacturing: General --- Hydrocarbon Resources --- Investment & securities --- Petroleum, oil & gas industries --- Electricity --- Manufacturing --- Energy prices --- Natural gas sector --- Oil prices --- Commodities --- Economic sectors --- Electric utilities --- Gas industry --- United States