Causality and feedback between institutional measures and economic growth

Recent cross-section studies have demonstrated a strong link between measures of corruption, bureaucratic quality, property rights, and other institutional variables, and economic growth. In this paper we build on previous research and present some empirical evidence on the direction of causality between institutional measures and growth. It appears that the poorer the country, and the longer the wait, the higher the influence of institutional quality on economic growth. However, we also show the existence of reverse causality. Indeed, it appears that economic growth also causes institutional quality.