Governance and returns on investment : an empirical investigation
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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- Alesina, Alberto & Perotti, Roberto, 1996.
"Income distribution, political instability, and investment,"
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