The Threshold Effects of Market In stitutional Quality on Economic Growth with an Emphasis on Government Integrity

The Threshold Effects of Market Ins titutional Quality on Economic Growth with an Emphasis on Government Integrity Abs tractAccording to ins titutional growth models, efficient ins titutions positively influence economic growth.Among these ins titutions, market ins titutions play a vital role by preventing market failures and enhancing resilience to economic shocks.Government integrity-specifically through reducing corruption-can further s trengthen the impact of these ins titutions on growth.This article aims to analyze the threshold effects of market ins titutional quality on the economic growth of 19 selected lowermiddle-income developing countries, with a focus on government integrity, over the period 2014-2022.To measure market ins titutional quality, this s tudy uses an index composed of the market regulator (averaging indicators for regulations and controls in the credit and labor markets) and the market s tabilizer (measured by access to sound money).The results indicate that government integrity acts as a transition variable in the economic growth model, with a threshold of 0.017% and two identified regimes, each showing a positive impact on growth.While the market ins titutional quality index does not significantly impact growth in the firs t regime, once the government integrity index crosses the threshold into the second regime, market ins titutional quality positively affects economic growth.Additional control variables-including human capital, capital per capita, technology, and foreign trade-also demons trate positive effects on economic growth.