Do Governance Indicators Explain Development Performance? A Cross-Country Analysis

The central question addressed by this study is whether countries with above-average governance grew faster than countries with below-average governance. Using the World Bank's worldwide governance indicators to measure governance performance, it examines whether a country with governance "surplus" in a given base year (1998) grew faster on average in a subsequent period (1998- 2011) than a country with governance "deficit." Governance is defined in several dimensions, including government effectiveness, political stability, control of corruption and regulatory quality, voice and accountability, and rule of law. The study finds that government effectiveness, political stability, control of corruption and regulatory quality all have a more significant positive impact on country growth performance than voice and accountability and rule of law. Developing Asian countries with a surplus in government effectiveness, regulatory quality and corruption control are observed to grow faster than those with a deficit in these indicators - up to 2 percentage points annually, while Middle East and North African countries with a surplus in political stability, government effectiveness, and corruption control are observed to grow faster than those with a deficit in these indicators by as much as 2.5 percentage points annually. Good governance is associated with both a higher level of per capita GDP as well as higher rates of GDP growth over time. This suggests that good governance, while important in and of itself, can also help in improving a country's economic prospects

A simultaneous probit model of earnings, migration, job change with wage heterogeneity

In this study, earnings are decomposed in order to measure the effects due to individual characteristics and to unobserved heterogeneity. These effects are shown to work in opposite directions, complicating the effect of earnings on migration. The use of aggregate earnings masks the two separate effects. Those earning more because of productive characteristics are less likely to move. However, higher earnings due to other reasons that are more qualitative act as an impetus for migration. Job change is often part of the decision to migrate. In our analysis we recognize the endogeneity of job change in the migration equation and estimate it separately in the model. Job change is found to have a significantly positive influence on migration. Moreover, the separate estimation of job change brings out the important role of both explained and unexplained earnings on the decision to switch jobs, both factors decreasing the perceived necessity of changing jobs.