Abstract
In the context of contemporary society, characterized by the information users’ growing and differentiated needs, the way country-level governance and social responsibility contribute to the ensuring of sustainable economic development is a concern for all the actors of the economic sphere. The aim of this paper is to test the causal linkages between the quality of country-level governance, economic growth and a well-known indicator of economic sustainable development, for a large panel of world-wide countries for a period of 10 years (2006–2015). While there are some prior studies that have argued the bidirectional causality between good public governance and economic development, this study intends to provide a new focus on the relationship between country-level governance and economic growth, on one hand, and between country-level governance and adjusted net savings, as a selected indicator of economic sustainable development, on the other hand. Four hypotheses on the causal relationship between good governance, economic growth and sustainable development were tested by using Granger non-causality tests. Our findings resulting from Granger non-causality tests provide reasonable evidence of Granger causality from country-level governance to economic growth, but from economic growth to country-level governance, the causality is not confirmed. In what regards the relationship between country-level governance and adjusted net savings, the bidirectional Granger causality is not confirmed. The main implication of our study is that improving economic growth and sustainable development is a very challenging issue, and the impact of macro-level factors such as country-level governance should not be neglected.
Highlights
There are a multitude of views in the theoretical and empirical literature regarding the relationship between country-level governance and different dimensions of sustainable development
The role of country-level governance is significant for economic growth and business development, if we keep in mind the main features that characterize good governance such as: accountability, transparency in policy making, an effective legislative framework where property rights are clearly defined and the predictability of business transactions is ensured [2]
The objective of this study is to explore the causal relationship between country-level governance measured through the World Bank governance indicators, economic growth measured through the most widely used indicator in previous literature such as the Gross Domestic Product, and sustainable development measured through adjusted net savings (% of Gross National Income (GNI)), by using Granger non-causality test
Summary
There are a multitude of views in the theoretical and empirical literature regarding the relationship between country-level governance and different dimensions of sustainable development. Some studies [4] show that good country-level governance requires accountability and transparency in elaborating economic policies and the rule of law, while all these key elements ensure relevant premises for generating economic performance and sustainable development. Transparency and an effective rule of law are some of the most meaningful characteristics of good governance that influence the economic development and the quality of business environment which should be focused on providing economic performance. The concept of country-level good governance became more and more relevant when various international aid agencies understood that the poor quality of governance structures across many developing economies was a significant obstacle to the increasing of their economic performance [10]
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