According to ins titutional growth models, efficient ins titutions positively influence economic growth. Among these institutions, market
institutions play a vital role by preventing market failures and enhancing resilience to economic shocks. Government integrity—specifically through reducing corruption—can further strengthen the impact of these institutions 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 markets 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 institutional quality index does not significantly impact growth in the first 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 demonstrate positive effects on economic growth.
