Determinants of economic growth: an empirical analysis in a panel of 28 OECD countries

Abstract

Aim of this paper is to identify the determinants of economic growth. In order to do so, an empirical analysis is conducted in a panel of 28 countries from 1960 to 2015. The empirical findings suggest that growth rate is enhanced and simultaneously stimulated by lower fertility rate, less ethnic tensions, better maintenance of rule of law, higher degree of international openness, lower inflation rate, higher investment ratio and lower tax burden. Growth is negatively related to the initial per capita GDP, ceteris paribus, something that supports the conditional convergence notion .We also find a positive relationship between democracy and growth where the former is measured in terms of political rights. To add more, there is strong indication of a nonlinear relation. In the absence of respect towards political and human rights, democratization tends to stimulate growth. But when a moderate degree of democracy is achieved, the effect of an improvement in democracy is not that intense as in the case where the degree of democracy is small.