Does “Good†Governance Promote Economic Growth According to Countries' Conditional Income Distribution
DOI:
https://doi.org/10.6000/1929-7092.2019.08.91Keywords:
Good governance, economic growth, panel data, income distribution.Abstract
This study identifies the relative impact of “good†governance on comparative economic growth performance for a large sample of countries classified based on their relative income distributions, namely; low income countries, middle income countries, and high income countries. The data set covers 100 countries throughout the period for 1996 to 2018. The empirical model is estimated with econometric pooled Ordinary Least Squares (OLS), random effects, fixed effects techniques and using the Hausman Test. According to the appropriate fixed effects estimated model, findings suggest that “good†governance generally has a positive and statistically significant effect on economic growth across all countries in the sample. However, results confirm that the impact of “good†governance differs according to conditional income distributions among countries. Indicators of “good†governance for low income countries are more likely to affect economic growth than those for middle and high income countries. Specifically, findings show that the dominant governance indicators for economic growth in low income countries include government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability. Findings also show that control of corruption seems not to influence economic growth for high and low income countries. There are some policy implications that can be drawn for countries to develop a variety of policies toward the role of governance in the economy according to their income distributions.
References
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Matovu, G. (2018). Policy options for good governance and local economic development in Eastern and Southern Africa. In Local Economic Development in the Changing World (pp. 341-353). Routledge.
Meyer, D. F. (2018). Predictors of good governance and effective government management: the case of Poland. Polish Journal of Management Studies, 18.
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Mo, P. H. (2001). Corruption and economic growth. Journal of Comparative Economics, 29(1), 66–79.
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Moreira, S. B. (2005). Evaluating the impact of foreign aid on economic growth: A cross-country study. Journal of Economic Development, 30(2), 25–48.
Olusanya, S. O. (2013). Impact of Foreign Direct Investment Inflow on Economic Growth in a Pre and Post Deregulated Nigeria Economy. A Granger Causality Test (1970–2010). European Scientific Journal, ESJ, 9(25), 25–34.
Oueslati, A. & Labidi M. A. (2015). Growth, Inequality and Governance: A Case of MENA Countries. SSRG International Journal of Economics and Management Studies, 2 (2): 28–34.
Owens, E. (1987). The future of freedom in the developing world: Economic development as political reform. Pergamon.
Pere, E. (2015). Impact of good governance in the economic development of Western Balkan countries. European Journal of Government and Economics, 4(1), 25–45.
https://doi.org/10.17979/ejge.2015.4.1.4305
Ugur, M. (2014). Corruption’s direct effects on per?capita income growth: a meta?analysis. Journal of Economic Surveys, 28(3), 472–490.
https://doi.org/10.1111/joes.12035
Santiso, C. (2001). Good governance and aid effectiveness: The World Bank and conditionality. The Georgetown Public Policy Review, 7(1), 1–22.
Sardar, Z. (1989). The future of freedom in the developing world: Economic development as political reform: New York and Oxford, Pergamon Press.
https://doi.org/10.1016/0016-3287(89)90053-0
Sardar, S. I. (2011). Good Governance: The Achilles’ Heel of South Asia – Is There a Way Forward? Regional Studies, 29(4), 1–34.
Sen, A. K. (1990). Development as capability expansion. The Community Development Reader, 2nd ed.; DeFilippis, J., Saeger, S., Eds, 319–327.
https://doi.org/10.1007/978-1-349-21136-4_3
Simplice, A., & Jellal, M. (2013). On the channels of foreign aid to corruption. AGDI Working Paper, No. WP/13/018, African Governance and Development Institute (AGDI), Yaoundé.
Wilson, R. (2016). Does governance cause growth? Evidence from China. World Development, 79, 138–151.
https://doi.org/10.1016/j.worlddev.2015.11.015
Vu, T. B., Gangnes, B., & Noy, I. (2008). Is foreign direct investment good for growth? Evidence from sectoral analysis of China and Vietnam. Journal of the Asia Pacific Economy, 13(4), 542–562.
https://doi.org/10.1080/13547860802364976
Zubair, S. S., & Khan, M. (2014). Good governance: Pakistan's economic growth and Worldwide Governance Indicators. Pakistan Journal of Commerce and Social Sciences, 8(1), 258– 271.
https://doi.org/10.6000/1929-7092.2016.05.27
Alam, M. R., Kiterage, E., & Bizuayehu, B. (2017). Government effectiveness and economic growth. Economic Bulletin, 37(1), 222-227.
Almanasir, A. H. A., & Shivaraj, B. (2017). Voluntary Corporate Governance Disclosure Innovative Evidence: The Case of Jordan. Journal of Reviews on Global Economics, 6, 443-454.
https://doi.org/10.6000/1929-7092.2017.06.45
Bai, J., Jayachandran, S., Malesky, E. J., & Olken, B. A. (2013). Does economic growth reduce corruption? Theory and evidence from Vietnam. National Bureau of Economic Research. Working Paper No. 19483. 1–63.
https://doi.org/10.3386/w19483
Bloom, D. E., Sachs, J. D., Collier, P., & Udry, C. (1998). Geography, demography, and economic growth in Africa. Brookings Papers on Economic Activity, 2, 207–295.
https://doi.org/10.2307/2534695
Brahim, M., & Rachdi, H. (2014). Foreign direct investment, institutions and economic growth: Evidence from the MENA region. Journal of Reviews on Global Economics, 3, 328-339.
https://doi.org/10.6000/1929-7092.2014.03.24
Carbonnier, G., Wagner, N., & Brugger, F. (2011). Oil, gas and min-erals: The impact of resource-dependence and governance on sustainable development. The Center on Conflict, Dev-elopment and Peacebuilding (CCDP) Working Paper, 1–32.
Chauvet, L., & Collier, P. (2004). Development effectiveness in fragile states: Spillovers and turnarounds. Centre for the Study of African Economies, Department of Economics, Oxford University: Mimeo.
Dadgar, Y., & Nazari, R. (2018). The impact of economic growth and good governance on misery index in Iranian economy. European Journal of Law and Economics, 45(1), 175–193.
https://doi.org/10.1007/s10657-012-9327-2
De Nicolò, G., Laeven, L., & Ueda, K. (2008). Corporate governance quality: Trends and real effects. Journal of Financial Intermediation, 17(2), 198–228.
https://doi.org/10.1016/j.jfi.2007.10.002
Ekanayake, E. M., & Chatrna, D. (2010). The effect of foreign aid on economic growth in developing countries. Journal of International Business and Cultural Studies, 3, 140–155.
Fayissa, B., & Nsiah, C. (2013). The impact of governance on economic growth in Africa. The Journal of Developing Areas, 47(1), 91–108.
https://doi.org/10.1353/jda.2013.0009
Gora, K. (2003). Corruption, Good Governance and Economic growth: The Case of Slovenia. Paper presented at the conference “Institutions in Transition,” June 19–21, 2003.
Hodge, A., Shankar, S., Rao, D.S. & Duhs, A. (2009). Exploring the Links Between Corruption and Growth. School of Economics Discussion Paper No. 392, June 2009, University of Queensland. Australia.
Huang, C. J., & Ho, Y. H. (2017). Governance and economic growth in Asia. The North American Journal of Economics and Finance, 39, 260-272.
https://doi.org/10.1016/j.najef.2016.10.010
Huang, C. J., & Ho, Y. H. (2018). The Impact of Governance on Income Inequality in Ten Asian Countries. Journal of Reviews on Global Economics, 7, 217–224.
https://doi.org/10.6000/1929-7092.2018.07.20
Insah, B. (2013). Foreign direct investment inflows and economic growth in Ghana. International Journal of Economic Practices and Theories, 3(2), 115–121.
Jalilian, H., Kirkpatrick, C., Parker, D. and Centre on Regulation and Competition (2006). The Impact of Regulation on Economic Growth in Developing Countries: A Cross-Country Analysis. Institute for Development Policy and Management, University of Manchester, UK, March 2006.
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2003). Government Matters III: Governance Indicators for 1996–2002 (No. 3106). The World Bank.
https://doi.org/10.1596/1813-9450-3106
Kargbo, P. M. (2012). Impact of Foreign Aid on Economic Growth in Sierra Leone. Working Paper No. 2012/07. United Nations University.
Kelly, R. (2016). Does financial sector development enhance the relationship between FDI and economic growth? A comparative study of East African countries. Journal of Reviews on Global Economics, 5, 145-153.
https://doi.org/10.6000/1929-7092.2016.05.12
Khan, M. (2007). Governance, economic growth and development since the 1960s. DESA working paper No. 54.
Kim, S. (2014). Socio-Economic Determinants of China’s Recent Economic Growth. Journal of Reviews on Global Economics, 3, 101-116.
https://doi.org/10.6000/1929-7092.2014.03.08
Kraay, A., Zoido-Lobaton, P., & Kaufmann, D. (1999). Aggregating governance indicators. The World Bank.
https://doi.org/10.1596/1813-9450-2195
Krugman, P. (1994). The Myth of the Asian Miracle. Foreign Affairs, 73(6), 62–78.
https://doi.org/10.2307/20046929
Larionova, N. I., Yalyalieva, T. V., & Napolskikh, D. L. (2018). Global Competitiveness, Neoindustrialization And Innovative Clusters: International Indicators And Trends Of Russian Federation. Revista Galega de Economía, 27(2), 125-138.
Lashaki, R. K., & Ahmed, E. M. (2017). FDI Inflow Spillover Effect Implications On The Asia Pacific Productivity Growth Through The Export Channel. Revista Galega de Economía, 26(3), 57-72.
Mahembe, E., & Odhiambo, N. M. (2017). On the link between foreign aid and poverty reduction in developing countries. Revista Galega de Economia, 26(2), 113-128.
Matovu, G. (2018). Policy options for good governance and local economic development in Eastern and Southern Africa. In Local Economic Development in the Changing World (pp. 341-353). Routledge.
Meyer, D. F. (2018). Predictors of good governance and effective government management: the case of Poland. Polish Journal of Management Studies, 18.
https://doi.org/10.17512/pjms.2018.18.1.16
Mo, P. H. (2001). Corruption and economic growth. Journal of Comparative Economics, 29(1), 66–79.
https://doi.org/10.1006/jcec.2000.1703
Moreira, S. B. (2005). Evaluating the impact of foreign aid on economic growth: A cross-country study. Journal of Economic Development, 30(2), 25–48.
Olusanya, S. O. (2013). Impact of Foreign Direct Investment Inflow on Economic Growth in a Pre and Post Deregulated Nigeria Economy. A Granger Causality Test (1970–2010). European Scientific Journal, ESJ, 9(25), 25–34.
Oueslati, A. & Labidi M. A. (2015). Growth, Inequality and Governance: A Case of MENA Countries. SSRG International Journal of Economics and Management Studies, 2 (2): 28–34.
Owens, E. (1987). The future of freedom in the developing world: Economic development as political reform. Pergamon.
Pere, E. (2015). Impact of good governance in the economic development of Western Balkan countries. European Journal of Government and Economics, 4(1), 25–45.
https://doi.org/10.17979/ejge.2015.4.1.4305
Ugur, M. (2014). Corruption’s direct effects on per?capita income growth: a meta?analysis. Journal of Economic Surveys, 28(3), 472–490.
https://doi.org/10.1111/joes.12035
Santiso, C. (2001). Good governance and aid effectiveness: The World Bank and conditionality. The Georgetown Public Policy Review, 7(1), 1–22.
Sardar, Z. (1989). The future of freedom in the developing world: Economic development as political reform: New York and Oxford, Pergamon Press.
https://doi.org/10.1016/0016-3287(89)90053-0
Sardar, S. I. (2011). Good Governance: The Achilles’ Heel of South Asia – Is There a Way Forward? Regional Studies, 29(4), 1–34.
Sen, A. K. (1990). Development as capability expansion. The Community Development Reader, 2nd ed.; DeFilippis, J., Saeger, S., Eds, 319–327.
https://doi.org/10.1007/978-1-349-21136-4_3
Simplice, A., & Jellal, M. (2013). On the channels of foreign aid to corruption. AGDI Working Paper, No. WP/13/018, African Governance and Development Institute (AGDI), Yaoundé.
Wilson, R. (2016). Does governance cause growth? Evidence from China. World Development, 79, 138–151.
https://doi.org/10.1016/j.worlddev.2015.11.015
Vu, T. B., Gangnes, B., & Noy, I. (2008). Is foreign direct investment good for growth? Evidence from sectoral analysis of China and Vietnam. Journal of the Asia Pacific Economy, 13(4), 542–562.
https://doi.org/10.1080/13547860802364976
Zubair, S. S., & Khan, M. (2014). Good governance: Pakistan's economic growth and Worldwide Governance Indicators. Pakistan Journal of Commerce and Social Sciences, 8(1), 258– 271.
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2019-12-16
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