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Governance Quality and Economic Growth

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  • Tao Kong

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Abstract

Among both academics and the wider development community there seems to be a general acceptance of the value of good governance and its role in promoting economic growth. However, beyond this general statement, there is a lack of deeper theoretical understanding as to why good governance is expected to foster economic growth and how such effects may take place. We de.ne governance quality as the capacity of a government to internalize externality. A theoretical model is developed to formally integrate governance quality into an endogenous growth framework. We elucidate the underlying mechanisms, through which governance quality affects economic performance: governance quality affects the productivity of public investment and in turn has an impact on economic performance. We also highlight that the endogeneity of governance quality and development stages have strong implications for the governance-growth relationship.

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Bibliographic Info

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2011-537.

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Length: 30 Pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:acb:cbeeco:2011-537

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  1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  2. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers.
  3. Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers 3519, National Bureau of Economic Research, Inc.
  4. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 607-25, December.
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  1. Nuevo gobierno: ¿mejor gobernanza y crecimiento?
    by Florentino Felgueroso in Nada Es Gratis on 2011-12-16 05:56:48

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