Revisiting the Relationship between Governance Quality and Economic Growth

Authors

  • Mohammad Salam Ibrahim AlShiab Higher Colleges of Technology
  • Husam-Aldin N. Al-Malkawi The British University in Dubai
  • Abdelmounaim Lahrech The British University in Dubai

Abstract

This study provides evidence on the relationship between governance quality and economic growth. We use the six Worldwide Governance Indicators (WGI) published by the World Bank and a sample of 29 countries (23 developed countries and 6 emerging economies) covering the period. To account for the potential endogeneity problem, we employ panel GMM estimators. The analysis proceeds in three stages. Firstly, we examine the effect of these six governance indicators on economic growth for the whole sample. Next, we apply a principal component analysis (PCA) to these indicators to construct a global governance index (GGI) and test its impact on economic growth. Finally, to examine the effect of the GGI on economic growth in emerging economies relative to developed countries, we introduce an interaction dummy variable. The results show a positive relationship between governance quality and economic growth in both developed and emerging economies. Moreover, the contribution of the GGI to the economic growth of emerging economies is more than that of developed ones.

Keywords: Worldwide Governance Indicators, Economic growth, Principal component analysis, Panel GMM estimator

JEL Classifications: O40; O43; C36; C38

DOI: https://doi.org/10.32479/ijefi.9927

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Author Biographies

Mohammad Salam Ibrahim AlShiab, Higher Colleges of Technology

Business Division,Assoicate Professor

Husam-Aldin N. Al-Malkawi, The British University in Dubai

Faculty of Business & LawHead of MSc & BSc Finance ProgramesFull Professor

Abdelmounaim Lahrech, The British University in Dubai

Faculty of Business & LawAssociate Professor

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Published

2020-07-11

How to Cite

AlShiab, M. S. I., Al-Malkawi, H.-A. N., & Lahrech, A. (2020). Revisiting the Relationship between Governance Quality and Economic Growth. International Journal of Economics and Financial Issues, 10(4), 54–63. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/9927

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