Growth Without Governance

Abstract

It is well known that there is a strong positive correlation Governance."They document this evidence using a between per capita incomes and the quality of newly updated set of worldwide governance-indicators governance across countries.Kaufmann and Kraay covering 175 countries for the period 2000-01, and use propose an empirical strategy that allows separation of the results to interpret the relationship between incomes this correlation into (1) a strong positive causal effect and governance focusing on the Latin America and running from better governance to higher per capita Caribbean region-within a worldwide empirical incomes, and, perhaps surprisingly at first, (2) a weak context.Finally, the authors speculate about the and even negative causal effect running in the opposite potential importance of elite influence and state capture direction from per capita incomes to governance.in accounting for the surprising negative effects of per The first result confirms existing evidence on the capita incomes on governance, present some evidence on importance of good governance for economic such capture in some Latin American countries, and development.The second result is new and suggests the suggest priorities for actions to improve governance absence of a "virtuous circle" in which higher incomes when such pernicious elite influence shapes public lead to further improvements in governance.This policy.motivates the authors' choice of title, "Growth Without This paper-a joint product of the World Bank Institute and the Development Research Group-is part of a larger effort in the Bank to generate and analyze worldwide governance indicators, assessing the manifestations and consequences of governance.The full governance indicators dataset is available interactively at http