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Governance and returns on investment : an empirical investigation

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  • Isham, Jonathan
  • Kaufmann, Daniel
  • Pritchett, Lant

Abstract

Using data from the World Bank's Operations Evaluation Department, the authors examine the link between the performance of Bank-financed projects and various indicators of country governance. They find that: there is a strong statistical, and possibly casual, link between civil liberties and project performance. After controlling for a variety of determinants of project performance, they find that in countries with the best civil liberties records projects have an economic rate of return between 8 and 22 percentage points higher than the rate of return in countries with the worst civil liberties. (The average rate of return in the sample is 6 percent). The typical political regime (whether authoritarian or democratic) and the status of more purely political liberties do not appear to significantly affect project performance.

Suggested Citation

  • Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant, 1995. "Governance and returns on investment : an empirical investigation," Policy Research Working Paper Series 1550, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1550
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    References listed on IDEAS

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    2. Joachim Von Braun, 2005. "Agricultural economics and distributional effects," Agricultural Economics, International Association of Agricultural Economists, vol. 32(s1), pages 1-20, January.
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    8. De la Torre, Augusto & Schmukler, Sergio, 2007. "Emerging Capital Markets and Globalization: The Latin American Experience," IDB Publications (Books), Inter-American Development Bank, number 349, December.
    9. Dorothy McCormick, 2008. "China & India as Africa's New Donors: The Impact of Aid on Development," Review of African Political Economy, Taylor & Francis Journals, vol. 35(115), pages 73-92, March.
    10. Abdur Chowdhury & Paolo Garonna, 2007. "Effective Foreign Aid, Economic Integration and Subsidiarity: Lessons from Europe," ECE Discussion Papers Series 2007_2, UNECE.
    11. Pritchett, Lant, 1996. "Mind your P's and Q's : the cost of public investment is not the value of public capital," Policy Research Working Paper Series 1660, The World Bank.
    12. Claessens, Stijn & Schmukler, Sergio & Klingebiel, Daniela, 2003. "Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors," CEPR Discussion Papers 3789, C.E.P.R. Discussion Papers.
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