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The effect of governance quality on future economic growth: an analysis and comparison of emerging market and developed economies

  • AbstractThis paper examines the influence of the six World Governance Indicators (WGIs), as defined by the World Bank, on the real GDP growth of five emerging markets, the BRICS (Brazil, Russia, India, China, and South Africa) countries, and three advanced economies, the United States, Germany and Japan. The analysis is based on a panel data set containing the six WGIs along with further macroeconomic variables (government debt, external debt, current account balance, trade balance, budget balance, foreign exchange rate and short-term interest rate), with annual data from 1996 to 2018. We find that regulatory quality has a positive impact on economic growth, an effect that remains stable across all robustness tests. This indicates that a sound regulatory environment stimulates economic growth. We also find a negative impact of rule of law on economic growth, but this effect is not robust. The literature, however, documents a negative effect from income to rule of law, expressing that higher income does not necessarily lead to a demand for better institutions. A principal component analysis on the WGIs shows that governance is diverse across countries, while stable over time. The first two PCs capture more than 95% of the WGIs variance and are able to cluster emerging and developed markets.

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Metadaten
Author:Luana Enikő Misi Lopes, Natalie PackhamORCiD, Ursula Walther
URN:urn:nbn:de:kobv:b721-opus4-42403
DOI:https://doi.org/10.1007/s43546-023-00488-3
ISSN:2662-9399
Parent Title (English):SN Business & Economics
Publisher:Springer Science and Business Media LLC
Document Type:Article
Language:English
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Hochschulbibliothek HWR Berlin
Release Date:2023/09/06
Tag:General Medicine
Volume:3
Issue:6
Article Number:108
Institutes:FB I - Wirtschaftswissenschaften
Open Access Publikationen (DINI-Set):open_access
Open Access Publikations financed by DEAL Project:hybrid
Licence (German):License LogoCreative Commons - CC BY - Namensnennung 4.0 International