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Governance, Institutions, and Economic Development

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  • Rashid Nikzad

    (Department of Economics, Carleton University, Ottawa, Canada)

Abstract

Literature suggests a positive relationship between a country’s social and economic development, good governance, and institutions. However, there is not a consensus on the nature of this relationship and the aspects of the governance that are most important for economic development. This paper addresses this question by empirically examining the relationship between a country’s economic performance and governance indicators in 1996-2019. Economic performance indicators include GDP per capita and GDP. Governance indicators are adopted from the World Bank’s Worldwide Governance Indicators. The paper shows that while most governance indicators have a positive and statistically significant impact on economic growth, their importance varies with the income level of the country. As such, improvements in different aspects of governance become more effective for economic growth as countries move through different stages of economic development.

Suggested Citation

  • Rashid Nikzad, 2021. "Governance, Institutions, and Economic Development," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 7(4), pages 7-22, October.
    • Handle: RePEc:mgs:ijoied:v:7:y:2021:i:4:p:7-22
    DOI: 10.18775/ijied.1849-7551-7020.2015.74.2001
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    References listed on IDEAS

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    1. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2005. "Governance matters IV : governance indicators for 1996-2004," Policy Research Working Paper Series 3630, The World Bank.
    2. Philippe Aghion, 2005. "Growth and Institutions," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 32(1), pages 3-18, March.
    3. Daniel Kaufmann & Aart Kraay, 2002. "Growth without Governance," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2002), pages 169-230, August.
    4. M.G. Quibria, 2006. "Does Governance Matter? Yes, No or Maybe: Some Evidence from Developing Asia," Kyklos, Wiley Blackwell, vol. 59(1), pages 99-114, February.
    5. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    6. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
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    More about this item

    Keywords

    Economic Development; Institutions; Governance.;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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