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Governance and returns on investment : an empirical investigation

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Author Info

  • 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.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1550.

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Date of creation: 30 Nov 1995
Date of revision:
Handle: RePEc:wbk:wbrwps:1550

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Related research

Keywords: Human Rights; Decentralization; Politics and Government; Public Health Promotion; ICT Policy and Strategies; Governance Indicators; National Governance; Politics and Government; Economic Policy; Institutions and Governance; Human Rights;

References

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  1. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  2. Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992. "Political Instability and Economic Growth," NBER Working Papers 4173, National Bureau of Economic Research, Inc.
  3. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-62, June.
  4. Abbas Pourgerami, 1988. "The political economy of development: A cross-national causality test of development-democracy-growth hypothesis," Public Choice, Springer, vol. 58(2), pages 123-141, August.
  5. Shea, J., 1993. "Instrument Relevance in Linear Models: A Simple Measure," Working papers 9312, Wisconsin Madison - Social Systems.
  6. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," World Bank Economic Review, World Bank Group, vol. 8(3), pages 351-71, September.
  7. Paul, Samuel, 1992. "Accountability in public services: Exit, voice and control," World Development, Elsevier, vol. 20(7), pages 1047-1060, July.
  8. Isham, Jonathan & Narayan, Deepa & Pritchett, Lant, 1995. "Does Participation Improve Performance? Establishing Causality with Subjective Data," World Bank Economic Review, World Bank Group, vol. 9(2), pages 175-200, May.
  9. Greene, William H, 1981. "On the Asymptotic Bias of the Ordinary Least Squares Estimator of the Tobit Model," Econometrica, Econometric Society, vol. 49(2), pages 505-13, March.
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Citations

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Cited by:
  1. Abdur Chowdhury & Paolo Garonna, 2008. "Effective Foreign Aid, Economic Integration and Subsidiarity: Lessons from Europe," UNECE Annual Report Economic Essays 2008_3, UNECE.
  2. Augusto de la Torre & Sergio L. Schmukler, 2007. "Emerging Capital Markets and Globalization : The Latin American Experience," World Bank Publications, The World Bank, number 7187, October.
  3. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 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.
  4. 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.
  5. Grootaert, Christiaan, 1999. "Social capital, houshold welfare, and poverty in Indonesia," Policy Research Working Paper Series 2148, The World Bank.
  6. 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.

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