Economic Growth, Markets and the Rule of Law: Brief Considerations on the Brazilian Case

Cunha, Alexandre B.

doi:10.15728/bbr.2021.18.2.5

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Article • BBR, Braz. Bus. Rev. 18 (2) • Mar-Apr 2021 • https://doi.org/10.15728/bbr.2021.18.2.5 copy

Economic Growth, Markets and the Rule of Law: Brief Considerations on the Brazilian Case

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

The existence of markets that operate smoothly is an important factor influencing a nation’s economic growth. Furthermore, an effective judicial system is a necessary condition for markets to function well. Therefore, it is reasonable to expect a positive relationship to exist between income per capita and adhesion to the rule of law. This conjecture is corroborated here in a sample of 110 countries in 2016. Additionally, the data show that the rule of law is relatively weak in Brazil, suggesting that an improvement of the Brazilian judicial system is a potential growth-enhancing reform.

KEYWORDS
Rule of law; markets; per capita income; growth

Variable	Mean	Median	Standard Deviation	Maximum	Minimum	Asymmetry	Kurtosis
y	13,775	6,500	16,922	82,330	320	1.7047	2.3305
L	0.5762	0.5386	0.1403	0.8868	0.3251	0.5560	-0.5895

Country	L		y
Country	Value	Ranking	Value	Ranking
Brazil	0.5538	52	8840	45
USA	0.7391	18	56,180	3
South Africa	0.5861	43	5,480	62
China	0.4813	80	8,260	48
India	0.5129	66	1,680	89
Russia	0.4530	91	9,720	42

Subsamples	Observations	α	β	R ²	MSE
$L_{i} < \bar{L}$	66	4.1188	8.0195	0.2383	0.7442
$L_{i} \geq \bar{L}$	44	4.3528	7.7356	0.6397	0.2811

Variable	L	EF	RI	PMI
L	1
EF	0.578	1
RI	0.658	0.487	1
PMI	0.490	0.483	0.564	1

L	Frequency
L	Absolute	%
0.3000-0.3599	2	1.82
0.3600-0.4199	9	8.18
0.4200-0.4799	19	17.27
0.4800-0.5399	26	23.64
0.5400-0.5999	14	12.73
0.6000-0.6599	9	8.18
0.6600-0.7199	11	10.00
0.7200-0.7799	6	5.45
0.7800-0.8399	9	8.18
0.8400-0.8999	5	4.55
Total	110	100

lny	Frequency
lny	Absolute	%
5.5000-6.0999	3	2.73
6.1000-6.6999	6	5.45
6.7000-7.2999	10	9.09
7.3000-7.8999	10	9.09
7.9000-8.4999	17	15.45
8.5000-9.0999	20	18.18
9.1000-9.6999	17	15.45
9.7000-10.8999	8	7.27
10.3000-10.8999	14	12.73
10.9000-11.4999	5	4.55
Total	110	100

Subsample	Observations	α	β	R ²	MSE
$L_{i} < \tilde{L}$	55	4.3764	7.4180	0.1657	0.7774
$L_{i} \geq \tilde{L}$	55	4.4318	7.6301	0.6539	0.3366

Subsample	Observations	α	β	R ²	MSE
1^st quintile	22	4.7601	6.4098	0.0665	0.8276
2^nd quintile	22	9.2104	-2.5230	0.0025	0.7975
3^rd quintile	22	3.2767	9.6910	0.0658	0.5619
4^th quintile	22	2.1504	11.1558	0.3007	0.4176
5^th quintile	22	5.8875	5.8217	0.4595	0.1170

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