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Measuring Informal Institutions with Google Trends

Johansson, Bjoern LU (2021) NEKN01 20211
Department of Economics
Abstract
Informal institutions are believed to be especially determinant in institutional change, as argued by both old and new institutional economic theory. However, due to the complexity of quantifying them, they are rarely measured. In this study, I examine how well one can capture informal institutions by using Google Trends. I create an index over informal institutional quality (IIQ), proxied by 66 Google Trend topics with worldwide coverage. The topics are linked to eight proposed institutions determinant for change. In addition to well-researched informal institutions such as equality, individualism, trust, hierarchy, and unionization, I propose financial literacy and homogeneous preferences as core informal institutions. I find that there... (More)
Informal institutions are believed to be especially determinant in institutional change, as argued by both old and new institutional economic theory. However, due to the complexity of quantifying them, they are rarely measured. In this study, I examine how well one can capture informal institutions by using Google Trends. I create an index over informal institutional quality (IIQ), proxied by 66 Google Trend topics with worldwide coverage. The topics are linked to eight proposed institutions determinant for change. In addition to well-researched informal institutions such as equality, individualism, trust, hierarchy, and unionization, I propose financial literacy and homogeneous preferences as core informal institutions. I find that there is a highly significant correlation between IIQ and GDP. I also find a strongly significant association between IIQ and R&D expenditure. Homogeneous preferences show to warrant faster GDP growth. Out of the measured institutions, financial literacy shows to have the strongest association with GDP, entrepreneurship and R&D expenditure. There is an association between IIQ and government size and a negative correlation between IIQ and the Gini coefficient. IIQ also correlates negatively with poverty headcount. Overall, the IIQ returns similar results against the dependent variables as established measures over formal institutional quality. This supports my claim that informal institutions can be captured using Google Trends. (Less)
Please use this url to cite or link to this publication:
author
Johansson, Bjoern LU
supervisor
organization
course
NEKN01 20211
year
type
H1 - Master's Degree (One Year)
subject
keywords
Informal institutions, quality of institutions, R&D, financial literacy, development
language
English
id
9052233
date added to LUP
2021-07-05 13:24:40
date last changed
2021-07-05 13:24:40
@misc{9052233,
  abstract     = {{Informal institutions are believed to be especially determinant in institutional change, as argued by both old and new institutional economic theory. However, due to the complexity of quantifying them, they are rarely measured. In this study, I examine how well one can capture informal institutions by using Google Trends. I create an index over informal institutional quality (IIQ), proxied by 66 Google Trend topics with worldwide coverage. The topics are linked to eight proposed institutions determinant for change. In addition to well-researched informal institutions such as equality, individualism, trust, hierarchy, and unionization, I propose financial literacy and homogeneous preferences as core informal institutions. I find that there is a highly significant correlation between IIQ and GDP. I also find a strongly significant association between IIQ and R&D expenditure. Homogeneous preferences show to warrant faster GDP growth. Out of the measured institutions, financial literacy shows to have the strongest association with GDP, entrepreneurship and R&D expenditure. There is an association between IIQ and government size and a negative correlation between IIQ and the Gini coefficient. IIQ also correlates negatively with poverty headcount. Overall, the IIQ returns similar results against the dependent variables as established measures over formal institutional quality. This supports my claim that informal institutions can be captured using Google Trends.}},
  author       = {{Johansson, Bjoern}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Measuring Informal Institutions with Google Trends}},
  year         = {{2021}},
}