Estimating the Quality of Economic Governance: A Cross-Country Analysis

This paper proposes a methodology to combine different dimensions of economic governance into a combined index. The quality of economic governance index (QEGI) is estimated as the weighted average of principal components of the standardised economic governance indicators, where weights are variances of successive principal components. The paper reports the QEGI for 71 developing and transition economies in 1998-2000. The evidence from a simple scatter diagram and a cross country regression analysis indicates that the better economic governance positively affects the economic performance (e.g., rise in per capita income, decline in poverty level, etc.) for sample of countries in our analysis.Economic governance,Economic performance, Cross-country analysis, principal component.

Comparing China and India: Is dividend of economic reforms polarized?

The paper develops a new measure of development, namely, development quality Index (DQI), to compare performance of China and India. The results show that national level development quality grew three times faster in China than in India. Conversely, the health quality grew three times as fast in India than China over the period 1980-2004. The overall regional development quality level improved in both countries, but polarization widened in China. The sign of inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies, while in recent years there are trends of polarization in economic dimension of DQI in India.Development, Inequality, Polarization, China, India

Does Governance Matter?Some Evidence from Indian States

This paper attempts to propose a methodology to combine different dimensions of governance indicators into a composite index. The governance index is computed as the weighted average of principal components of the standardized governance indicators, where weights are variances of successive principal components. Since the notion of good governance is multi-dimensional, it is conceptualised as a goal and as a process that accelerates growth, equity and human development potential. We therefore estimate the governance index on the basis of five indicators, such as crime rates, riots, industrial disputes and strikes, Gini index, and debt-income ratio. Then we propose to explore whether the quality of governance determines development outcomes such as life expectancy, literacy, infant mortality rate and per capita income (logarithms of), within the panel data model framework. The evidence from 16 major Indian states (from state/regional level) strongly suggests that better quality of governance leads to better development outcomes.Governance,Development,Index,Panel Data

Comparing China and India: Is the dividend of economic reforms polarized?

The paper compares the economic performance of China and India during the period of their ongoing reform policies. It develops a new measure of development, namely, a development quality index (DQI), to compare performance of China and India. The results show that national-level development quality grew three times faster in China than in India. Conversely, the health quality index grew three times as fast in India than China over the period 1980-2004, narrowing the gap in outcomes. The overall regional development quality level improved in both countries, but polarization widened in China. The direction of overall inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies. The inter-regional economic polarization in recent years is more pronounced in India.Development, Inequality, Polarization, China, India

Comparing China and India: Is the dividend of economic reforms polarized?

The paper compares the economic performance of China and India during the period of their ongoing reform policies. It develops a new measure of development, namely, a development quality index (DQI), to compare performance of China and India. The results show that national-level development quality grew three times faster in China than in India. Conversely, the health quality index grew three times as fast in India than China over the period 1980-2004, narrowing the gap in outcomes. The overall regional development quality level improved in both countries, but polarization widened in China. The direction of overall inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies. The inter-regional economic polarization in recent years is more pronounced in India

Economic Growth, Well-Being and Governance under Economic Reforms: Evidence from Indian States

This paper provides empirical evidence, from the study of sixteen major Indian states for the period 1980-2001, that under the economic reform process, the better institutional mechanism could actually help economies to grow faster with higher level of economic well-being. We estimate economic well-being index (by aggregating fifteen socio-economic variables, viz, education, infrastructure, technological progress, income, etc.) and also index of good governance (by aggregating thirteen variables indicating rule of law, government functioning, public services, press freedom, etc) by multivariate statistical measures. Panel regression showed that governance measures, and economic policy variables are crucial to explain differential level of development performance across states in India during the last two decades.Growth, Well-being, Governance, Economic Reforms, Panel data, India

A new way to link development to institutions,policies and geography

The paper aims to examine the role of institutions relative to economic policy and geography in explaining the differential level of development across countries over time. To that end, it attempts to construct a Development Quality Index (DQI) and an Institutional Quality Index (IQI) by using multivariate statistical method of principal components. It shows that (i) higher level of IQI along with economic policy and geography factors lead to a positive improvement in the level of DQI; and (ii) results remain robust for IQI and relatively robust for economic policy and geography even when it is compared across cross-section and panel data estimation for a set of 102 countries over 1980 to 2004. The results strongly indicate that institutions matter in the context of specific economic policy mixes and geography related factors illustrated by disease burden, etc. It demonstrates that relative influence of institutions varies across stages of development.Development, Institutions, Economic policy, Geography, Principal component, Instrumental variables, Panel data

Does WTO accession affect domestic economic policies and institutions?

The paper aims to examine policy-anchor hypotheses by analysing the impact of WTO accession process on domestic economic policies and institutions of newly acceded WTO members. It shows that the process of obtaining WTO membership, under certain circumstances, can lead to a positive improvement in domestic econoic policies and institutions. The difference-in-difference analysis is employed as the empirical model. Results are robust with alternative model specifications and choice of economic policies and institutional variable.WTO, Economic policies, Institutions, Difference-in-Difference Analysis

Correlating Growth with Well-Being during Economic Reforms Evidence from India and China

This paper investigates the hypothesis that economic growth is critical in inducing well-being during economic reforms. The regional (16 Indian states and 28 Chinese provinces) level study of India and China show that the quality of growth has been essential for well-being. We estimate level of economic well-being by aggregating different socio- economic indicators through multivariate statistical method of factor analysis. We estimate economic growth (per capita income, real) along with their well-being level for four different sub-periods since 1978/80-2001 for all regions. Our empirical results confirm that differential level of well-being across regions is correlated with the quality of growth.Growth, Well-being, Economic Reforms, Multivariate statistical method, India, China

Demand System Estimations and Welfare Comparisons: Application to Indian Household Data

In this study, we explore the relationship between the rank of a demand system and the estimation results both in terms of consumption behaviour and more importantly in terms of welfare analysis. Money-metric utility levels given by equivalent expenditures are taken as welfare indicators for calculating poverty and inequality measures as they incorporate substitution effects due to relative price changes. Estimations are carried out using relevant data concerning Indian households (rural and urban) collected from nation-wide surveys conducted by the National Sample Survey Organisation (NSSO). We find that although the specification does play an important role in the economic explanation of consumer behaviour with some models being more suited than others depending on the pattern of consumption, welfare comparisons do not change significantly from one model specification to the other. On the other hand, there are notable differences between results based on estimated equivalent expenditures and those based on observed real expenditures.Demand system estimation, household surveys, poverty, inequality, India.