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Measuring Institutional Quality: A Review

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Dynamics of Institutional Change in Emerging Market Economies

Part of the book series: Contributions to Economics ((CE))

Abstract

To empirically assess the role of institutions and institutional quality in economic performance, it is necessary to select the proxy variable(s) for institutional quality. Although several indicators have been suggested in the literature, individuals and international organizations are still trying to introduce indicators that reflect the actual institutional quality of various countries. As institutions have different dimensions, several indicators have been suggested in the literature to measure the quality of institutions. However, there is no consensus among experts on which index should be used.

Each scholar, especially those in transition countries, has used a different proxy variable, depending on the limitations to data access, to measure institutional quality. However, the key question is whether any indicator can be used as a proxy variable to determine institutional quality. The main purpose of this chapter is to answer this important question. To this end, most of the existing indicators are described descriptively and some important points regarding the use of each indicator are made. In addition, some indicators, including the rule of law and property rights as two measures of the quality of legal-economic institutions, are described in more detail.

The literature review showed that not all indicators had a common characteristic. In fact, different indicators were proposed for each specific institution; thus, caution should be exercised when interpreting the results of empirical studies.

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Notes

  1. 1.

    For more on these two interpretations and the advantages of thin interpretation of RoL, see Moller (2018) and Bender (2018).

  2. 2.

    See Versteeg and Ginsburg (2017) or https://worldjusticeproject.org ›our-work› wjp-rule-law-index for further details.

  3. 3.

    The detail of calculation and further explanation of this index are given in Voigt (2012, pp. 270–276).

  4. 4.

    The detail of calculation and further explanation of this index can be found in Nardulli et al. (2013, pp. 165–175).

  5. 5.

    For further detail on the calculation of this index, see Wang et al. (2019, pp. 277–278).

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  1. Department of Economics, Shiraz University, Shiraz, Iran

    Ali Hussein Samadi & Masoumeh Alipourian

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    Nezameddin Faghih

  2. Department of Economics, Shiraz University, Shiraz, Iran

    Ali Hussein Samadi

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Samadi, A.H., Alipourian, M. (2021). Measuring Institutional Quality: A Review. In: Faghih, N., Samadi, A.H. (eds) Dynamics of Institutional Change in Emerging Market Economies . Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-61342-6_6

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