Regional economic growth and convergence: The role of institutions and spillover effects in Colombia

Abstract

This study analyses the relationship between institutions and economic growth at the intra-regional level in Colombia. We estimated models of economic growth augmented by an institutional variable and spatial effects. The results show that conditional convergence in regions of Colombia considering institutional and spatial effects leads to a convergence rate that is relatively higher than those found in a standard growth model. The results also show that institutions have a strong positive impact on regional economic growth. The spatial spillover effects of institutional factors of a region exhibit a negative effect on economic growth in neighbouring regions, which can be explained by high levels of heterogeneity and institutional fragmentation found in regions in Colombia.