Working Paper 2018-458
This paper analyzes the role of good governance in fostering pro-poor and inclusive growth. Using a sample of 112 countries over the period 1975-2012, the main results show that growth is in general pro-poor. However, growth has not been inclusive – as illustrated by a decline in the bottom quintile share of the income distribution. While all features of good governance support income growth and reduce poverty, only government effectiveness and the rule of law are found to enhance inclusive growth. Investigating the determinants of pro-poor and inclusive growth highlights that education strategies, infrastructure improvement and financial development are the key factors for poverty reduction and inclusive growth. Relying on the Panel Smooth Transition Regression (PSTR) model following Gonzalez et al. (2005), the paper identifies a nonlinear relationship between governance and pro-poor growth while the impact of governance on inclusive growth appears to be linear.
Authors: Djeneba Doumbia.