Institutional reforms now and benefits tomorrow: How soon is tomorrow?

This paper aims to investigate the timing of the impact of changes in the quality of institutions on macroeconomic efficiency. We do so by applying Battese and Coelli (1995)'s stochastic frontier model at the aggregate level. We find that changes in the quality of institutions exert two effects on macroeconomic efficiency, a short-term, i.e. after two to four years, and a medium-term effect, around eight years. Robustness checks performed with different measures of the quality of institutions tend to support these results.