Governance and Development Outcomes in Asia

Date: January 2014
Type: Papers and Briefs
Subject:
Series: Economics Working Papers
ISSN: 1655-5252 (print)
Author: Sen, Kunal

Description

The relationship between governance and economic development is one of the most important areas of research in international development. Much of the previous literature has focused on whether better governance leads to higher levels of income. In this paper, it examines the relationship between governance and broader development outcomes, with a specific focus on developing Asia. In empirical analysis, disaggregated measures of governance are used to capture different dimensions of governance, and to allow for the possibility that different dimensions of governance such as administrative capacity, legal infrastructure, and state accountability can affect development indicators differentially. This paper finds a clear role for governance in affecting most development outcomes except levels of schooling. This is particularly evident for state administrative capacity and legal infrastructure, and less evident for state accountability.

However, this paper finds that the benign relationship between governance and development is weaker for Asian countries for several of the development indicators. It also learns that the key mechanism by which governance affects development is by increasing the mobilization of domestic resources and by increasing the effectiveness with which these resources are spent on social sectors. Along with the fact that governance quality is lower in Asia than other regions of the world (except sub-Saharan Africa), this suggests that improvements in governance along with the strengthening of the mechanisms by which governance affects social development can deliver clear gains in development outcomes in developing Asia.

Contents

  • Abstract
  • Introduction
  • The Relationship between Governance and Development
  • Empirical Strategy, Variables, and Data
  • Empirical Analysis and Results
  • Conclusions and Policy Implications
  • References