The Impact of Institutional Quality on Inclusive Growth in Developing Countries

Abstract

Inclusive growth offers a new perspective on measuring progress of a country. In many developing nations, despite experiencing economic growth, poverty and income inequality remain either on the rise or stagnate. This paper investigates the impact of institutional quality on inclusive growth in 91 developing countries over the period of 2008 to 2021 and employed System Generalized method of moments (GMM). To measure growth inclusiveness, the study construct an inclusive growth index using Social opportunity function. Additionally, six different indicators are used to measure institutional quality. The empirical results of this study shows that there is positive and statistically significant impact of institutional quality on inclusive growth. Moreover, the paper also constructs indifference curves for selected developing countries to check their inclusiveness. Finally, it is suggested that developing economies developing countries should prioritize strengthening their institutions as the foundation for fostering inclusive growth, improving public trust, and ensuring long-term social and economic stability.