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The Political Economy of Growth and Governance

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  • Paul G. Hare

Abstract

There are diverse ideas about governance around the world, and this paper studies them through the following questions: (a) what does the available evidence tell us about the political and institutional requirements for sustained economic growth? (b) What do we need from the state to secure growth? (c) How do a country's internal characteristics support or impede its growth? (d) How does the external environment of a country influence its economic growth prospects? These elements are then put together into a model of growth, from which we derive conclusions about governance arrangements. Thus the paper outlines a simple framework within which to think about the political economy of growth that can be summed up in five points: good government, with secure political conditions; credible macroeconomic stability; savings and investment high enough to sustain adequate growth; openness to the world economy; and the discipline of external engagement. It then argues that the growth model needs to be underpinned by suitable governance arrangements, and suggests that good governance has two main elements, each quite complex in practice, namely: protection of property rights, and accountability of government.

Suggested Citation

  • Paul G. Hare, 2007. "The Political Economy of Growth and Governance," CERT Discussion Papers 0702, Centre for Economic Reform and Transformation, Heriot Watt University.
  • Handle: RePEc:hwe:certdp:0702
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    References listed on IDEAS

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    1. Serguey Braguinsky & Roger Myerson, 2007. "A macroeconomic model of Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 77-107, January.
    2. Daron Acemoglu, 2006. "A Simple Model of Inefficient Institutions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(4), pages 515-546, December.
    3. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, October.
    4. Anke Hoeffler & Paul Collier, 2005. "Democracy and Resource Rents," Economics Series Working Papers GPRG-WPS-016, University of Oxford, Department of Economics.
    5. Besley, Timothy, 2007. "Principled Agents?: The Political Economy of Good Government," OUP Catalogue, Oxford University Press, number 9780199283910.
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    Cited by:

    1. Grajzl Peter & Dimitrova-Grajzl Valentina, 2009. "The Choice in the Lawmaking Process: Legal Transplants vs. Indigenous Law," Review of Law & Economics, De Gruyter, vol. 5(1), pages 615-660, November.

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    More about this item

    Keywords

    political economy; global economy; economic growth; governance; macroeconomic stability; property rights;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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