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The Effects of Convergence in Governance on Capital Accumulation in the Black Sea Economic Cooperation Countries

  • Marie-Ange Veganzones

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Ahmet Faruk Aysan

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Omer Faruk Baykal

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

This paper aims to ascertain the effects of convergence in governance on investment decisions among a sample of 43 developing countries, using dynamic system GMM estimations. In an increasingly interdependent economic world, regions with good governance are considered to be areas of higher investment, as a result of further integration and collaborative action among member states. Since its foundation, in 1992, Black Sea Economic Cooperation (BSEC) countries have gone through a transition process and, to a large extent, this is about institutional transformation. Good governance institutions are an assurance to guarantee property rights and minimize transaction costs, thus creating an environment conducive to investment and growth. In this paper, we investigate the impact of BSEC on its member countries regarding convergence of governance institutions. We show that convergence has occurred within the region with respect to bureaucratic quality, control over corruption, law and order, internal conflict, ethnic tensions, but not to government stability and democratic accountability. The paper also calculates how much capital accumulation the region would gain by reaching the average institutional standards of the EU-12. This study is the first attempt in the BSEC region to investigate the link between regionalization and institutional convergence, at the same time as to quantify its economic impact through investment.

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Paper provided by HAL in its series Working Papers with number halshs-00559653.

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Date of creation: 26 Jan 2011
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Handle: RePEc:hal:wpaper:halshs-00559653
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  1. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
  2. Lant Pritchett & Michael Woolcock & Gwen Busby & Jonathan Isham, 2004. "The Varieties of Resource Experience: How Natural Resource Export Structures Affect the Political Economy of Economic Growth," Middlebury College Working Paper Series 0308r, Middlebury College, Department of Economics.
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  8. Aysan, Ahmet Faruk, 2005. "The Role of Efficiency of Redistributive Institutions on Redistribution: An Empirical Assessment," MPRA Paper 17773, University Library of Munich, Germany.
  9. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, vol. 36(2), pages 229-242, October.
  10. Olson, Mancur, Jr & Sarna, Naveen & Swamy, Anand V, 2000. " Governance and Growth: A Simple Hypothesis Explaining Cross-Country Differences in Productivity Growth," Public Choice, Springer, vol. 102(3-4), pages 341-64, March.
  11. Shang-Jin Wei, 2000. "Natural openness and good government," Policy Research Working Paper Series 2411, The World Bank.
  12. Ahmet Faruk Aysan & M. K. Nabli & M-A Veganzones-Varoudakis, 2006. "Governance Institutions and Private Investment: An Application to the Middle East and North Africa," Working Papers 2006/08, Bogazici University, Department of Economics.
  13. Schmidt-Hebbel, Klaus & Muller, Tobias, 1991. "Private investment under macroeconomic adjustment in Morocco," Policy Research Working Paper Series 787, The World Bank.
  14. repec:ner:tilbur:urn:nbn:nl:ui:12-3125517 is not listed on IDEAS
  15. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May.
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