Calibrating the Economic Impact of a Deficit in the İnstitutional Quality of Government: The Case of Spain

The quality of government institutions and the absence of corruption are key factors of economic development. How could we quantify, for any given country, the overall monetary cost of poor-quality institutions? This paper compares the institutional quality in Spain with those of the rest of the world and assesses the economic cost of the deficit of institutional quality in the country. Although Spain is among the top 20% of countries worldwide in terms of the quality of governance institutions, the value of the Spanish governance indicators is below what corresponds to Spain’s economic development level. The authors calibrate the effect that a correction of the deficit of institutional quality would have on Spanish income under different parameter scenarios and always finds a high positive potential impact. The method we introduce to conduct these calibrations can serve as a useful blueprint for the analysis of other countries.


Abed, G., & Davoodi, H. (2000). Corruption, Structural Reforms and Economic Performance in the Transition Economies. IMF Working Paper No.132, Washington, International Monetary Fund.

Acharya, V. V., Cooley, T., Richardson, M., & Walter, I. (2011). Market Failures and Regulatory Failures: Lessons from Past and Present Financial Crises. Macroeconomics Working Papers 23273, East Asian Bureau of Economic Research.

Acemoglu, D., Johnson, S., & Robinson, J.A. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91, 1369–1401.

Acemoglu, D., Johnson, S. & Robinson, J. (2005a). The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth. The American Economic Review, 95(3), 546-579.

Acemoglu, D., Johnson, S. & Robinson, J. (2005b). Institutions as a fundamental cause of long-run growth. In P. Aghion & S. N. Durlauf (eds.) Handbook of Economic Growth, Volume 1A, chapter 6, 385-472.

Acemoglu, D., Gallego, F.A. & Robinson, J.A. (2014). Institutions, Human Capital, and Development. Annual Review of Economics, 6, 875–912.

Alcalá, F. & Ciccone, A. (2004). Trade and Productivity. Quarterly Journal of Economics, 119(2), 613-646.

Alcalá, F. & Jiménez, F. (2018). Los costes económicos del déficit de calidad institucional y la corrupción en España. Bilbao, Fundación BBVA (Colección Informes, Economía y Sociedad).

Bobonis, G., Gertler, P., Gonzalez-Navarro, M. & Nichter, S. (2016). Vulnerability and Clientelism. University of Toronto, mimeo.

Campos, N.F., Dimova, R.D. & Saleh, A. (2010). Whither Corruption? A Quantitative Survey of the Literature on Corruption and Growth. IZA Discussion Paper No. 5334.

de Vaal, A. and Ebben, W. (2011). Institutions and the Relation between Corruption and Economic Growth. Review of Development Economics, 15, 108-123.

Eichengreen, B., (1994). Institutions and Economic Growth: Europe After World War II, CEPR Discussion Papers 973, C.E.P.R. Discussion Papers.

Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2004). Do Institutions Cause Growth? Journal of Economic Growth, 9, 271-303.

Hall, R. E., & Jones, C.I. (1999). Why Do Some Countries Produce So Much More Output Per Worker Than Others? Quarterly Journal of Economics, 114(1), 83-116.

Jiménez, F. (2016). Los efectos de la corrupción sobre la desafección y el cambio político en España. In M. Villoria, J.M. Gimeno & J. Tejedor (eds.), La corrupción en España: ámbitos, causas y remedios jurídicos, Barcelona, Atelier, 49-67.

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2007). The Worldwide Governance Indicators Project: Answering the Critics. World Bank Policy Research Working Paper 4149.

Kaufmann, D., Kraay, A. & Mastruzzi, M. (2010). The Worldwide Governance Indicators: A Summary of Methodology, Data and Analytical Issues. World Bank Policy Research Working Paper No. 5430.

Kaufmann, D., & Kraay, A. (2002). Growth Without Governance. World Bank Policy Research Working Paper 2928.

Kehoe, T. J., & Ruhl, K. J. (2010). Why Have Economic Reforms in Mexico Not Generated Growth? Journal of Economic Literature, 48(4), 1005-1027.

Knack, S., & Keefer, P. (1995). Institutions and Economic Performance: Cross- Country Tests Using Alternative Institutional Measures. Economics and Politics, 7(3), 207-227.

Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110(3), 681–712.

Méon, P. G., & Sekkat, K. (2005). Does corruption grease or sand the wheels of growth? Public Choice, 122, 69-97.

Mo, P. H. (2001). Corruption and Economic Growth. Journal of Comparative Economics, 29, 66–79.

North, D. C., & Thomas, R. (1973). The Rise of the Western World: A New Economic History, Cambridge, Cambridge University Press.

North, D. C. (1981). Structure and Change in Economic History. New York, W.W. Norton & Co., 1981.

North, D. C. (1990). Institutions, Institutional Change, and Economic Performance, Cambridge University Press, New York.

OECD. (2002). Regulatory Policies in OECD Countries. From Interventionism to Regulatory Governance, Paris.

Rock, M. T., & Bonnett, H. (2004). The Comparative Politics of Corruption: Accounting for the East Asian Paradox in Empirical Studies of Corruption, Growth and Investment. World Development, 32(6), 999–1017.

Rodrik, D., Subramanian, A., & Trebbi, F. (2004). Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development. Journal of Economic Growth, 9, 131–165.

Sachs, J. D., & Warner, A. (1995). Economic Reform and the Process of Global Integration. Brookings Papers on Economic Activity, 1, 1–95.

Stiglitz, J., & Rosengard, J. (2015). Economics of the Public Sector, 4th edition, W. W. Norton & Company.

Ugur, M., & Dasgupta, N. (2011). Evidence on the economic growth impacts of corruption in low-income countries and beyond: a systematic review. London, EPPI-Centre, University of London.

Viscusi, W. K., Vernon, J. M. & Harrington, J.E. (2000). Economics of Regulation and Antitrust, 3rd ed, Cambridge, MA, MIT Press.

World Bank. (2018). World Development Indicators [Accessed: 9 March 2021]

World Bank. (2021) Worlwide Governance Indicators at [Accessed: 9 March 2021]

Kaynak Göster