Replication Data for: Institutional Development, Transaction Costs and Economic Growth: Evidence from a Cross-Country Investigation

In this study, we examine the contribution of transaction costs to economic growth across 139 countries in 2003-2012 period using 24 different indices of transaction costs. We reconstruct an augmented Solow growth model with human capital accumulation allowing for the direct and indirect effects of transaction costs on technology level and accumulation rates. Controlling for unobserved heterogeneity and common technology shocks, the evidence indicates persistently negative effect of rising transaction costs on economic growth. The contribution of contract enforcement and secure property rights to cross-country productivity differences appears to be more important than the accumulation factors combined. The results provide evidence that transaction costs might be an important mechanism behind cross-country productivity differences, suggest the importance of contractual relations and indicate their lasting impact on economic performance over time. The analysis includes the evaluation of the relationship between transaction costs and economic growth for a large panel of countries and is based on a large-scale macro-level data collection. For each indicator, we compute the signal-to-noise ratios and use them to weigh transaction cost covariates in the cross-country regression analysis. The ratios are constructed from the overall and relative survey sizes on country-to-country and year-to-year basis upon which the covariates are constructed.