Abstract
This study utilizes panel data analysis over the 1996 to 2015 period to investigate the impact of governance quality (including democratic quality and technical quality) on income inequality in ten Asain countries, classified as “advanced economies” and “emerging market and developing economies”. The empirical results show that the impacts of democratic quality and technical quality on income inequality are significantly negative within “emerging market and developing economies”. However, for the “advanced economies”, the effects of democratic quality and technical quality on income inequality are nonsignificantly positive and significantly positive, respectively. These findings imply that promoting good governance is useful to reduce income inequality for “emerging market and developing economies” but the effect may not be effective for “advanced economies.
Highlights
In recent years, Southeast Asia has world’s fastest growing economy while it has the serious income inequality
Does good governance improve income inequality? This study examines the impacts of governance quality on income inequality during the period of 1996 to 2015 in ten Asian countries, which have different levels of economic development are classified as “advanced economies” and “emerging market and developing economies”
The quality of governance is measured by six indicators of Worldwide Governance Indicators (WGIs) and classified as democratic quality and technical quality
Summary
Southeast Asia has world’s fastest growing economy while it has the serious income inequality. A large number of studies explore the relationship between income inequality and economic growth; such as Kuznets (1955), Persson and Tabellini (1994), Psacharopoulose et al (1995), Barror (1996), Deininger and Squire (1998), Barror (2000), Janvry and Sadoulet (2000), Panizza (2002), Alfranca et al (2003), Samanta and Heyse (2006), Jomo (2006), Ricardo (2006), Lee et al (2013), and Oueslati and Labidi (2015) etc. Governance plays an important role in promoting a country’s competitiveness, attracting foreign investment, and increasing economic growth. One of the most commonly discussed questions about governance is whether good governance is beneficial to economic performance. There has been a number of empirical studies examined the impact of governance on economic growth which suggest that good governance is helpful for promoting economic growth (Scully, 1988; Sacks and Warner, 1995; Hall and Jones, 1999; Rodrik, 1997; Kaufmann et al, 1999; Wei, 2000; Acemoglu et al, 2001; Dollar and Kraay, 2002; Kaufmann and Kraay, 2002; Easterly and Levine, 2003; De Groot et al, 2004; Rigobon and Rodrik, 2005; Jalilian et al, 2006; Gamber and Scott, 2007; Arusha, 2009; Evrensel, 2010; Marıa-Teresa et al, 2012; Fayissa and Nsiah 2013; Huang and Ho, 2017)
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