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Links Between Policy and Growth: Cross-Country Evidence.




This paper discusses links between policy settings, institutions and economic growth in OECD countries. The majority of the results presented in the paper are based on panel-data growth regressions using a 'pooled-mean group' estimation technique allowing short?term adjustments and convergence speeds to vary across countries. In addition to the 'primary' influences of capital accumulation and skills embodied in the human capital, the results confirm the importance for growth of R&D activity, the macroeconomic environment, trade openness and well developed financial markets. They also confirm that many of the policy influences operate not only 'directly' on growth but also indirectly via the mobilisation of resources for fixed investment. The paper also reports some bivariate correlations between OECD indicators of product regulation and growth. These provide some supporting evidence that the negative impact of stringent regulations and administrative burden on the efficiency of product markets also results in a negative impact on overall economic growth.