Elite quality and the pathway to prosperity: a cross-country mediation analysis

This study employs a cross-sectional analysis of 123 countries between 2007 and 2020 to investigate the effect of elite quality on prosperity. To identify the key transmission channels through which elite governance impacts economic outcomes, we employ Ordinary Least Squares (OLS), two-step OLS, and mediation analysis. The results demonstrate that high-quality elites exert a positive and significant influence on prosperity, both directly and indirectly. The indirect effect is achieved through improvements in life expectancy and education, both of which are critical drivers of human capital development and economic growth. Conversely, infant mortality and vulnerable employment act as negative mediators, reflecting the deleterious effects of poor governance on public health and labor market conditions. Furthermore, positive mediators such as interpersonal trust, macroeconomic stability, and investment freedom demonstrate how effective governance creates an environment conducive to economic growth. The analysis controls for potential biases, including omitted variables bias and endogeneity, ensuring robust and reliable estimates of causal relationships. By distinguishing between positive and negative mediators, this study provides a more nuanced understanding of how elite quality shapes prosperity. The findings underscore the critical role of elite governance in promoting inclusive growth and suggest that improving elite quality, particularly in health, education, and institutional stability, can significantly enhance prosperity in diverse national contexts.