World Governance Indicators Research Articles

Role of institutional quality on women's empowerment—A case of highly gender unequal Asian countries

AbstractEqual access to rights and opportunities for women and men is one of the indicators of women's empowerment. Classical economic growth models ignored gender differences in the labor force, but the literature now acknowledges the merits of equal participation of both genders in economic activities. This study investigates the determinants of gender equality as an instrument of women's empowerment. This study focused on Asian countries with a high gender gap in several domains. This lag in women's empowerment is hypothesized to be due to low‐quality institutions. The data for this investigation is compiled from World Development Indicators, Global Gender Gap reports, the Polity IV project, World Governance Indicators, and Human Development Reports. The Panel Feasible Generalized Least Squares results show that female unemployment and good governance tend to increase the gender gap in Asian countries, while Human Development Index, trade openness and democracy reduce the gender gap. This quantitative assessment is instrumental for policymakers in socially empowering women on equal terms with men in Asia.

The Catastrophe of Corruption in the Sustainability of Foreign aid: A Prediction of Artificial Neural Network Method in Indonesia

The rising corruption levels in Indonesia are becoming a cause for concern and raise doubts about their impact on the stability of foreign aid in the country. Therefore, this study aims to predict the long-term viability of foreign aid in Indonesia based on international perceptions of corruption and corruption cases in the country. Data were obtained from World Governance Indicators, the Indonesian Ministry of Finance, and the World Bank, and the study used a backpropagation artificial neural network (ANN) for prediction. The results from ANN are compared to linear models and vector autoregression (VAR). The finding shows that ANN outperforms the other models based on the coefficient of determination and MSE values. Furthermore, it highlights the strong relationship between corruption perception and foreign aid sustainability with an R-value of 0.991. According to the ANN estimation, gratification has a significant impact on foreign aid. In response to this finding, the study recommends the Indonesian government take action to combat corruption in maintaining the international trust and ensuring the stability of foreign aid.

Environmental Change and Inclusive Finance: Does Governance Quality Matter for African Countries?

This paper examines the effect of environmental change on inclusive finance in African countries during the period 1996–2020. It also investigates the moderating role of government quality on the association between environmental change and inclusive finance. We collected five-year average data from various sources such as the World Development Indicators, the World Governance Indicators, and the International Monetary Fund. Government quality is measured by six dimensions: political stability, voice and accountability, government effectiveness, regulation quality, the rule of law, and corruption control. Environmental change is measured by CO2 emissions. Inclusive finance is measured by the financial development index through depth, access, and efficiency ratios. These variables represent the most used in prior studies as they are published by international organizations such as the World Bank and the International Monetary Fund, which represent a reputable source of timely information related to the business environment in which business executives operate in several countries. The results show a significant impact of environmental change on inclusive finance. Including economic governance induces a significant and positive effect on financial inclusion in all instances. Our results also show that the coefficients of the interaction between environmental change and governance dimensions are positive and significant. The moderator role of governance is improved when taking into account political, institutional, and economic governance. Our findings offer more motivation for regulators and governments to develop environmental policies that integrate inclusive finance to meet sustainable development goals. Our results are important as they can help regulators, investors, and policymakers to assess and better understand the potential moderation role of governance quality in the relationship between inclusive finance and environmental change.

Financial Liberalization, Institutions and Savings in Nigeria

The rate of savings in Nigeria has been low over the years. Despite efforts to stimulate savings through the adoption and implementation of financial liberalization policies, the rate of savings in the country has remained low in absolute and comparative terms. Previous studies on the determinants of savings in the country focused mainly on the association between savings and financial liberalization [(Gross Domestic Product (GDP), Broad Money Supply (BMS) and Deposit interest Rate (DPR)], paying scant attention to institutions [(Rule of Law (RUL), Control of Corruption (COC), Political Stability and absence of violence/terrorism (POS), Regulatory Quality (RGQ), Voice and Accountability (VAC) and Government Effectiveness (GEF)]. This study therefore examined the effect of financial liberalization and institutions on Gross Domestic Savings (GDS) in Nigeria. The study adopted ex-post facto design. Annual data from 1996 to 2020 on Nigeria was sourced from World Development Indicators (WDI, 2020) and World Governance Indicators (WDI, 2020). Data was analyzed using Ordinary Least Squares (OLS) estimation technique. The study adopted the 5% level of significance. Findings of the study revealed that GDP, DPR and BMS had positive and insignificant effect on GDS in Nigeria. The findings also showed that institutions was correlated with GDS in Nigeria. The study concluded that the effect of financial liberalization on savings in Nigeria improved when it was moderated with institutions. The study recommended that the country should strengthen its institutions by controlling corruption and ensuring political stability and regulatory quality to boost its savings.

Does Facebook penetration improve governance? A reflection on the World Governance Indicators of 185 countries

PurposeSocial media creates a public sphere, which functions as the third wheel of governance. This study aims to examine the relationship between Facebook penetration and the World Bank’s World Governance Indicators.Design/methodology/approachFirst, a Pearson correlation was estimated between Facebook penetration and governance indicators. Second, ordinary least squares analysis was used to examine a variety of additional economic and population factors, including Facebook penetration. In both instances, the colinearity of the variables is examined.FindingsThe findings indicate that there is no conclusive correlation between Facebook penetration and governance; however, the opposite is true for developing, emerging and least developed countries, though the relationship is not uniform across regions. In addition, per capita gross domestic product and population dynamics, specifically the proportion of the population aged 15–64, have a significant impact on governance measures. The colinearity of the variables suggests that governance is a broad concept, and that the direct correlation between Facebook penetration and governance may be misleading.Research limitations/implicationsFuture research should incorporate panel data from other social media platforms, such as Twitter and Reddit, to better understand temporal factors and the relationship between social media penetration and governance.Practical implicationsThis paper opens up new avenue for investigation on the impact of social media on governance.Social implicationsThis paper can contribute to the complexity of social media as means for voice and accountability. In addition, the paper mentions how social media can be used more neutrally to ensure exposure to diverse perspectives.Originality/valueThe growing importance of the internet and the popularity of social networking websites are generating a great deal of scholarly attention. To the best of the authors’ knowledge, there is almost no literature that links Facebook penetration and governance. This paper intends to fill this void.

Infrastructure, institutions and economic growth in Sub-Saharan Africa: New evidence using the CS-ARDL approach

This study examined the interactive effect of infrastructure and quality of institutions on economic growth in Sub-Saharan Africa over the period 1996 and 2020 using the Cross-Sectional-Autoregressive Distributed Lag estimator. This was with a view to providing additional macroeconomic evidence that is specific to the SSA region on the response of economic growth to infrastructure development contingent on the quality of the underlying institutions. Annual data on variables such as real Gross Domestic Product (GDP) per capita, fixed telephone subscriptions, mobile cellular subscriptions, electric power consumption, improved water source, improved sanitation facilities, gross capital formation per capita, labour force, urbanisation ratio, land area and population density were obtained from the World Bank Development Indicators (WDI) of the World Bank, 2021 edition. Also, data on institutional quality variables, namely, control of corruption, government effectiveness, political stability and absence of violence/terrorism, regulatory quality, rule of law, as well as voice and accountability were sourced from the World Governance Indicators (WDI) also of the World Bank, 2021 edition. Results showed that the per capita convergence holds true for countries in SSA in the long run, while it does not hold in the short run. The findings also revealed that infrastructure does not independently lead to economic growth in SSA when the role of institutions is not considered. This implies that any improvement in the stock of infrastructure will promote growth only when it is complemented with strong institutions. The study concluded that countries with weak institutions do not benefit maximally from infrastructure development policies as weak institutions constrain the efficient use of infrastructure assets.

A panel data analysis of the effect of state governance on the global competitiveness of BRICS nations

This research investigates the effect of state governance of BRICS nations on their global competitiveness and specific aspects of competitiveness factors, i.e., Knowledge, Technology, and Future Readiness, for the period of 2017-2021 using World Bank’s World Governance Indicators (WGI) as the independent variable and IMD’s World Competitiveness Ranking (WCR) as the dependent variable. The role of state governance emerged as an important source of global competitiveness and its factors for BRICS nations in the results which revealed certain specific crucial relationships. Overall, 37.68% variation in the WCR rankings of BRICS nations is determined by four key dimensions of WGI namely Government Effectiveness, Political Stability and Absence of Violence, Regulatory Quality, and Control of Corruption with the Control of Corruption being the most significant variable in the model. For the hypotheses relating the State Governance and specific factors of Knowledge, Technology, and Future Readiness, the highest contribution of 40.19% is revealed to be contributed by these four governance variables in Technology rankings, followed by 32.93% variation in Future Readiness and 27.03% in Knowledge. The results provide evidence for the role of the quality of governments and governance in securing global competitiveness by nations. The results are particularly useful for strategic state governance planning and implementations for BRICS nations to improve their competitive global rankings individually and collectively, particularly in the dimensions of control of corruption, government effectiveness, political stability, and absence of violence.

FDI Flows in resource-rich countries: does the quality of institutions matter?

Relevance. Foreign investment is likely to be attracted to resource-rich countries because of their wealth of natural resources. However, the fact that foreign direct investment (FDI) contributes less than 10% of these countries’ GDP indicates that FDI has a non-proportional impact when compared to the size of the natural resources. Hence, it is critical to identify the missing link impeding resource optimization through FDI. Research objective. Given the significance of FDI, the study seeks to ascertain whether the quality of institutions in resource-rich countries influences FDI inflows. This is significant because resource-rich countries may have other factors that encourage FDI but do not result in resource optimization. Data and methods. The study employed panel data analysis to analyze the impact of FDI on economic growth in resource-rich countries and the role of institutions in attracting FDI. The study relies on the Augmented Mean Group Estimator and on the annual data from the World Bank's World Development Indicator and the World Bank's World Governance Indicator for the top ten resource-rich countries. Results. Our preliminary evidence indicated that FDI had a positive and significant effect on economic growth in resource-rich countries. The extent of the influence, on the other hand, is minimal for all categories of countries. Our main results revealed that institutional quality has a significant pull effect on FDI, with trade openness playing a key role, particularly in resource-rich nations with well-developed institutions. Conclusions. We found that institutional quality plays a critical role in attracting FDI, which could have hampered natural resource optimization. Furthermore, countries with high institutional quality and less restrictive investment policies attract more foreign direct investment (FDI) than countries with low institutional quality and with investment policies ranging from moderate to restrictive. In general, resource-rich countries, particularly those with weak institutional qualities, should address the gap in institutional quality to attract more inward investment.

Investigating institutional quality and carbon mitigation drive in Sub-Saharan Africa: Are growth levels, energy use, population, and industrialization consequential factors?

In view of the United Nations’ Sustainable Development Goals on clean and responsible energy consumption, climate change mitigation, and sustainable economic growth (UN-SDGs-7, 11–13), this study examines institutional quality (IQ)–carbon emissions nexus in the framework of the Environmental Kuznets Curve (EKC) hypothesis. Six dimensions of IQ from the World Governance Indicators (WGIs) were used while focusing on Sub-Saharan African (SSA) countries between 1996 and 2019. After controlling for growth, energy use, and industrialization levels, the empirical results validated the EKC hypothesis for the SSA as a unit increase in economic growth initially worsens the environment while further economic expansion eventually improves the environment. However, mixed results were obtained on the effects of IQ indicators. CO2 emissions are only substantially reduced by corruption control, regulatory quality, and the rule of law among other IQ measures. Furthermore, the causality analysis showed a unidirectional causality between growth and environmentally detrimental energy consumption levels coupled with a two-way emission-population growth causality flow as well as a two-way emissions—IQ causality channel. While economic growth, energy use, and industrialization levels undermine environmental sustainability in the SSA region via increased carbon emissions, the overall findings signal the moderating roles of IQ. Hence, the strengthening of institutions is recommended for environmental sustainability enhancement in the SSA region.

Determinants of foreign direct investment inflows to COMESA member countries: an integration of institutional and socio-economic factors

In developing economies, stable foreign direct investment inflow is used as a means of realization of private sector growth and sustainable development goals. However, there is variability in inflows to African region in general and its economic bloc groupings in particular overtime across countries. In this regard, numerous empirical studies have been carried out on the determinants of investment inflow variability using different datasets on developing countries despite the studies have produced paradoxical findings. The aim of this study is, therefore, to empirically identify factors that determine variability of foreign direct investment inflows to COMESA member countries using panel data estimators. The study used explanatory research design with arrangement of secondary data, ex post control over variables, unbalanced short panel inclined with quantitative approach. The data were acquired from world development and governance indicators of World Bank for a period of 15 years ranging from 2002 to 2016 for 17 countries. Econometric model estimation procedures and diagnostic tests for classical linear regression model assumptions were carried out before making valid analysis. Accordingly, empirical evidence of the study revealed that infrastructure, government effectiveness, economic growth, control over corruption, trade openness, political stability, human capital and financial development have statistically positive effect on the inflow. However, external debt, inflation and regulatory quality failed to show significant effect. Therefore, member countries should take measures to narrow-up bottlenecks of financial development, improve infrastructure, scale-up trade integration, improve human capital quality, work to bring better political stability and to control corruption in order to boost-up stable inflows.

Public perceptions of governance and tax evasion: insights from developed and developing economies

Purpose This paper aims to explore how the role of the perception of good public governance reduces tax evasion (TE). Besides, this study investigates whether the nexus of public governance and TE differs between developed and developing economies. Design/methodology/approach Apart from the ordinary least squares (OLS) model, this study uses the linear mixed modeling technique. The World Governance Indicators and the multiple causes estimation (MIMIC) method are used to measure public governance. The shadow economy is used as a proxy for TE. Findings The results show that people's perceptions of public governance and the quality of government institutions are core elements that influence tax-evasion behavior. Besides, the rule of law (RoL) and political stability (PS) significantly impact tax-evasion behavior in developing countries. Nevertheless, the RoL, the control of corruption and PS are the most critical tax-evasion determinants among public governance indicators for developed countries. Regulatory quality shows a substantial positive relationship with TE in developed but not developing countries. Practical implications This paper provides a guide for policymakers on reducing tax-evasion behavior by paying more attention to maintaining the RoL and PS and fighting corruption. Additionally, this study highlights the importance of people's perceptions of the government's pursuit of the above policy-related improvements, which, in turn, affect their tax behavior. Originality/value To the best of the authors’ knowledge, this study is the first to explore the role of people's perceptions of improvements in public governance and how this can reduce TE behavior in developed and developing economies. Unlike prior studies, this study used the linear mixed model method, which is more advantageous than OLS and produces robust estimators.

Fish grabbing: Weak governance and productive waters are targets for distant water fishing.

Distant water fishing occurs worldwide as foreign fleets fish in the exclusive economic zones (EEZs) of other states. We test the hypothesis that host state governance performance is an explanatory factor in observed distant water fishing effort using Global Fishing Watch's fishing effort data obtained from vessels' automatic identification system (AIS). We examine the explanatory power of the World Governance Indicators (WGI), Gross Domestic Product (GDP) per capita, and biophysical fisheries productivity indicators (temperature, oxygen, salinity, nutrients, and primary productivity) on fishing effort from foreign fleets across the four most common gear types (fixed gear, longliners, trawlers, and tuna purse seiners). Our models include both host EEZ fishery productivity indicators and governance indicators with R2 values of 0.97 for longlining, 0.95 trawling, 0.95 for fixed gear and 0.82 for tuna purse seiners. Although a lack of good governance may enable illegal, unreported and unregulated fishing, the United Nations Convention of the Law of the Sea (UNCLOS) has enabled the legal establishment of foreign fishing contracts. However, it is unlikely that fishing contracts are decoupled from economic and political negotiations on other issues. We argue that it is worthwhile to consider the term "fish grabbing", meaning wealthier and politically more powerful states consciously seek to profit from fishing in the waters of often weaker states through developing legal fishing contracts.

Does Technical and Democratic Governance Have the Potential to Enhance Health Spending Allocations?

Abstract Nowadays, the medical systems of the EU Member States have a need for more efficient public policies and strategies to integrate the new societal challenges, the fragile economic recovery from the COVID-19 pandemic, and sustain the development of health systems. This research explores the relationship between public governance and health expenditures allocation, under the theory of welfare economics and the concern for economic development. The research approaches both qualitative and quantitative methodologies. The first refers to bibliometric analysis and review of the existing literature, followed by data mapping process to rank the EU countries based on the variables employed. The quantitative approach also includes advanced empirical analyses (principal component analysis - PCA and regression analysis) performed over the period 2007-2020. Two indices were created through PCA, technical governance and democratic governance, gathering the effects from different world governance indicators. The main results reveal that both governance indices have a direct influence on health expenditures per capita, while GDP growth, applied as a control variable, negatively influences health expenditures. Our results emphasise a need to redesign the public governance of health systems in terms of health spending allocations and increase investments in healthcare to support economic growth in the long run.

Efficiency of public spending on human capital in Africa

Government spending on human capital continues to increase over the years. However, knowledge of the efficiency of such spending is limited. Using data from World Bank’s World Development Indicator and World Governance Indicator from 2006 to 2017 and Data Envelopment Analysis and DEA Bootstrapping models, the study examined the relative technical efficiencies of public spending on human capital and their correlates in Africa. The study found public spending on health and education in Africa to be inefficient. Efficiency was much higher in health spending than in educational spending. Factors such as institutional quality, economic growth, government expenditure, foreign direct investment, and trade openness were found to influence the efficiency of public spending on human capital. Government should put in place measures to stimulate trade, ensure institutional quality and growth of urbanization to help improve efficiency in public spending.

A four-year experience in the the public sector: An analytical study of a governance model for the achievement of Saudi Arabia’s vision 2030

This research studies the effectiveness of Saudi Arabia’s new governance model: Saudi Vision 2030. It examines the quality of governance, coordination between relevant stakeholders, and follow-up efforts in relation to good governance practices. Changes in governance are essential to ease the transition away from financial dependency on oil. This study analyzes the components of the Saudi governance model according to World Governance Indicators. It includes initiatives taken to apply governance principles across the public and private sectors. It also elucidates the extent to which public entities in Saudi Arabia foster good governance in terms of accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. Finally, the study offers recommendations to overcome obstacles impeding good governance in the Saudi Arabian the public sector.

Institutions and FDI: Impact Analysis by Countries’ Income Level

This paper scrutinises the relationship between foreign direct investment (FDI) and institutional quality using panel data for 44 high-, 39 upper middle-, 23 low- and 35 lower middle-income countries over the period 2000 to 2017. We revisit the relationship by using a composite institutional index of World Governance Indicators (WGI), constructed using principal component analysis (PCA). Further, we extend the analysis to estimate the impact of the different dimensions of WGI indicators on FDI flows, using the generalised methods of moments (GMM). Our empirical findings for developed countries suggest that the institutional index is a robust determinant of FDI inflows in high income countries, whereas it is not significant in upper-middle income countries. Dimensions, such as rule of law, regulatory quality and control of corruption are key determinants of FDI flows to high-income countries, whereas none of the dimensions is significant in upper middle-income countries. Findings for developing countries, specifically lower middle-income countries, indicate that the overall index as well as individual dimensions are insignificant because of the poor quality of institutional framework. Ceteris paribus, politically stable economies endowed with an efficient and a credible government and strong regulatory framework tend to attract FDI flows into low-income countries.

Role of Governance, Trade, and Tourism in Foreign Direct Investment in Pakistan

The Primal objective of this research is to reveal the role of governance, tourism, and trade in the stimulation of FDI inflows in Pakistan. These forces have been integrated for empirical methodology after a detailed examination of past studies. The study took data set for selected variables from World Development Indicators (WDI) and World governance indicators (WGI) for the past two decades (2000-2021). Except for governance, tourism, and trade, this research incorporates macroeconomic stability and financial development as the stimulators of FDI inflows in Pakistan. In statistical data estimation, after using the ADF test, the ARDL technique is applied based on the variable's cointegration order. Both short and long-run estimates of ARDL confirmed the statistical significance of all studied variables that are governance (GOVEF), tourism (LTRSM), trade (TD), gross savings (GS), and broad money (BM). Bound test and CUSUM disclosed that there is long-run cointegration and the examined model is statistically significant and stable. Overall findings disclosed that GOVEF and trade are positively correlated, while LTRSM confirmed a negative association with FDI inflows for the case of Pakistan.

E-Governance as good governance? evidence from 15 West African countries

ABSTRACT This research examines assumptions about the relationship between e-governance and governance in 15 West African countries through an analysis of the 2016 and 2018 World Governance Indicators (WGI) and E-government Development Index (EDGI), proxies for governance and e-governance, respectively. A Pearson correlation analysis demonstrates a significant positive correlation between WGI and EDGI. When disaggregated, however, some dimensions of governance fail to correlate with e-governance. Notably, governance indicators correlate positively with each other thus reinforcing the critical role of traditional institutions of governance in achieving good governance. The study concludes that while ICTs are effective in advancing the goals of governments, they achieve better outcomes when integrated with established institutions and structures of governance. It advances an understanding of the concepts of development and governance by providing empirical evidence of the prospects and limitations of ICTs in the administrative practices of governments, especially in geopolitical contexts of limited resources.

Does institutional quality moderate the relationship between corporate governance and stock liquidity? Evidence from the emerging market of Pakistan.

The main aim of this study was to empirically analyze whether Institutional Quality moderates the relationship between corporate governance and stock liquidity through the light of agency and information asymmetry theory. To the best of our knowledge, this is the first finance study. The sample consists of 230 non-financial firms listed on the Pakistan stock exchange during the period of 2009–2019. We used an instrumental variable approach and our new Institutional Quality index composed of world governance indicators and a corporate governance index, developed via principal component analysis, to demonstrate a relationship between corporate governance and stock liquidity and check the moderating role of Institutional Quality by following the resources complementary phenomenon. Our results show a significant, positive relationship between the corporate governance index and stock liquidity, suggesting that well-governed firms have high liquidity. The results show that the Institutional Quality index has a positive moderating impact on the relationship between corporate governance and stock liquidity, suggesting that corporate governance in Pakistan is weak. Our results are robust to a series of endogeneity checks using alternative proxies of stock liquidity.

National Governance Quality, COVID-19, and Stock Index Returns: OECD Evidence

This research argues that national governance quality may moderate the relationship between COVID-19 and stock returns across markets. Building on the well-established relationship between COVID-19 shock and stock returns, we focus on how the quality of a country’s governance system affects the relationship between the COVID-19 crisis and stock returns. Using data from the World Governance Indicators, the World Bank, and the John Hopkins University Coronavirus Resource Centre (JHU-CRC) for 29 OECD markets from 23 January to 31 December 2020, our findings confirm this hypothesis. Our results suggest that, the estimated coefficient on the interaction term is negative (−0.004) and statistically different from zero at the 5% level of significance. This result can be inferred that the higher the national governance quality is, the weaker the effect of COVID-19 on stock returns will be. Specifically, the negative impact of COVID-19 on stock market returns was more pronounced in countries where the national governance quality index is lower. Our results also show a strong negative association between COVID-19 and stock market returns across the sample. The results are robust to changes in governance quality measures, estimation methods, and explanatory variables. The results have several policy implications such that better institutions may partially offset the adverse impact of the COVID-19 shock on stock market returns.