Growth, Poverty Reduction and Governance in Developing Countries: a Survey

According to the World Bank (World Bank, 2007), the aim of the Country Policy and Institutional Assessment (CPIA) is to assess “how conducive [a country’s policy and institutional] framework is to fostering poverty reduction, sustainable growth and the effective use of development assistance.” We review the most recent (since 2001) empirical and theoretical literature on the determinants of sustained growth, poverty reduction and the effective use of development assistance, distinguishing between policies/institutions versus outcomes, underlying the areas of agreement and discussing the current controversies. Drawing from this literature, we underline what are the current weaknesses of the CPIA. We emphasize especially the controversies on the association between the CPIA criteria and some determinants of sustained growth, poverty reduction and the effective use of development assistance. We then list the key determinants identified in the literature that have been left out by the CPIA. Finally, after reviewing the literature, we conclude that, concerning the determinants of sustainable growth as well as poverty reduction and the effective use of development assistance, one of the most important points made in the literature is that “there is not universal recipe” (Barder and Birdsall, 2006). As a consequence, one of the main criticisms against the CPIA is that it “relies too heavily on a uniform model of what works in development policy” (Kanbur, 2005b).