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Growth and governance: A nonparametric analysis

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  • Huynh, Kim P.
  • Jacho-Chávez, David T.

Abstract

According to conventional wisdom, a positive relationship exists between governance and growth. This paper reexamines this empirical relationship using nonparametric methods. We use different governance measures, as defined in World Governance Indicators provided by the World Bank. The findings show that only three of the six measures: voice and accountability, political stability, and rule of law are significantly correlated with economic growth. Regulatory control, control of corruption, and government effectiveness were found to be insignificant. The concept of growth profile curves are introduced as a visual device to interpret the results of the nonparametric analysis. We find that the empirical relationship between voice and accountability, political stability, and growth are highly nonlinear. These effects demonstrate heterogeneity across indicators, regions, and time. These empirical results are complementary to the literature on growth diagnostics in demonstrating that specific, targeted reforms to improve governance may be a more effective policy lever to encourage economic growth rather than wholesale reform. Finally, they provide a cautionary tale to practitioners using parametric methods. Journal of Comparative Economics 37 (1) (2009) 121-143.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 37 (2009)
Issue (Month): 1 (March)
Pages: 121-143

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Handle: RePEc:eee:jcecon:v:37:y:2009:i:1:p:121-143

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Governance Growth Kernel smoothing Growth profiles curves;

References

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  1. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," NBER Working Papers 10568, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Libman, Alexander, 2008. "Democracy and growth: is the effect non-linear?," MPRA Paper 17795, University Library of Munich, Germany.
  2. Flachaire, Emmanuel & García-Peñalosa, Cecilia & Konte, Maty, 2014. "Political versus economic institutions in the growth process," Journal of Comparative Economics, Elsevier, Elsevier, vol. 42(1), pages 212-229.
  3. Mika Kortelainen & Simo Leppänen, 2013. "Public and private capital productivity in Russia: a non-parametric investigation," Empirical Economics, Springer, Springer, vol. 45(1), pages 193-216, August.
  4. Halkos, George & Tzeremes, Nickolaos, 2012. "Carbon dioxide emissions and governance: A nonparametric analysis for the G-20," MPRA Paper 40387, University Library of Munich, Germany.
  5. Law, Siong Hook & Lim, Thong Cheen & Ismail, Normaz Wana, 2013. "Institutions and economic development: A Granger causality analysis of panel data evidence," Economic Systems, Elsevier, Elsevier, vol. 37(4), pages 610-624.
  6. Maria del Pilar Baquero Forero & Toshifumi Kuroda & Takanori Ida, 2010. "Cultural determinants of countries management efficiency:A random coefficients stochastic frontier approach," Discussion papers, Graduate School of Economics Project Center, Kyoto University e-10-012, Graduate School of Economics Project Center, Kyoto University.
  7. Crombrugghe, Denis de & Farla, Kristine, 2012. "Preliminary conclusions on institutions and economic performance," MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) 035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  8. Evrensel, Ayse Y., 2010. "Corruption, growth, and growth volatility," International Review of Economics & Finance, Elsevier, Elsevier, vol. 19(3), pages 501-514, June.
  9. Yulia Kotlyarova & Marcia M Schafgans & Victoria Zinde-Walsh, 2011. "Adapting Kernel Estimation to Uncertain Smoothness," STICERD - Econometrics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE /2011/557, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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