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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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    7. Augusto de la Torre & Sergio L. Schmukler, 2007. "Emerging Capital Markets and Globalization : The Latin American Experience," World Bank Publications - Books, The World Bank Group, number 7187, December.
    8. Sudeshna Ghosh Banerjee & Michael C. Munger, 2004. "Move to markets? An empirical analysis of privatization in developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 213-240.
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    10. 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.
    11. Ulrich Eydam & Florian Leupold, 2023. "What is it good for? On the Inflationary Effects of Military Conflicts," CEPA Discussion Papers 65, Center for Economic Policy Analysis.
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