What Matters for Growth in Europe? Institutions versus Policies, Quality versus Instability

Reprint No. 2015:9

Author(s): Niclas Berggren, Andreas Bergh and Christian BjørnskovYear: 2015 Title: Journal of Economic Policy Reform Volume (No.): 18 (1) Pages: 69–88
Online article (restrictions may apply)

We study how the quality and instability of institutions and policies affect economic growth in 35 European countries. While stability entails valuable predictability, instability can reflect reforms that offer positive long-run consequences. We construct measures of quality and instability for a panel of countries for 1984–2009. Results suggest that the quality of policy is growth-promoting. Notably, this positive effect becomes larger the more unstable policies are. The findings suggest that for European countries, the benefits of policy flexibility – due to experimentation and learning or making rent seeking more difficult – dominate the costs of reduced predictability.

Berggren, Niclas, Andreas Bergh and Christian Bjørnskov (2015), "What Matters for Growth in Europe? Institutions versus Policies, Quality versus Instability". Journal of Economic Policy Reform 18(1), 69–88.

Niclas Berggren


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Andreas Bergh


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Christian Bjørnskov


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