Regulatory Quality and Economic Performance: Evidence from European Countries

Abstract

This study investigates the relationship between regulatory quality and economic growth across 11 European countries over the period 2010–2023 using a comprehensive panel data framework. Employing pooled OLS, fixed effects, two-way fixed effects, and System GMM estimators, the analysis examines the robustness, heterogeneity, and dynamic properties of the regulatory quality–growth nexus. The results indicate that regulatory quality does not have a statistically significant or robust effect on economic growth once country-specific and time-specific heterogeneity are controlled for. Additional analyses reveal no significant differences across Western, Central, and Eastern European countries, nor evidence of dynamic or non-linear effects. The findings suggest that in mature and highly regulated European economies, regulatory quality may act more as a background institutional condition rather than a direct driver of short-term growth, highlighting the importance of complementary macroeconomic factors.