Does Economic Globalization Have a Similar Effect on Governance for All Countries in the World?

The impact of economic globalization on governance quality has been one of the open theoretical and empirical questions in the literature of institutional economics that has always attracted a lot of attention from the scholars. Some scholars have consistently examined the impact of globalization on the quality of governance. However, the question is how a country’s economic and institutional structures can affect the impacts of globalization on the quality of governance? This chapter was an attempt to answer this question using data from 182 countries during 2002–2016. To this end, first, we used principal component analysis (PCA) technique for combing six sub-indices (dimensions) of governance to make overall governance index. Then, the countries were divided into four categories based on the global average of the overall governance and per capita income. The system-generalized method of moments (SYS-GMM) estimation procedure was used to estimate our model. Before estimating the models, cross-sectional dependency (CD) tests, some unit root tests, and slope homogeneity test (Pesaran MH, Yamagata T, J Econometrics 142:50–93, 2008) (PY test) were used. The results showed that the overall globalization and trade openness had a positive effect on the quality of overall governance in countries with higher levels of income and governance than the global average and a negative effect in countries with lower quality of overall governance and per capita income than the global average. This finding indicates that the level of quality of governance of a country is a deciding factor in how much that given country benefits from globalization.