ABSTRACT
How important is good governance for economic growth? Can economic growth be sustained without good governance? The answer is best captured in the oftcited aphorism that good governance promotes growth and that growth further improves governance. Mauro (2004: 1) notes “a consensus seems to have emerged that corruption and other aspects of poor governance and weak institutions have substantial, adverse effects on economic growth.” Hall and Jones (1999: 84, 95), who found large productivity differences across countries, conclude:
our hypothesis is that differences in capital accumulation, productivity, and therefore output per worker are fundamentally related to differences in social infrastructure across countries. In fact [our] central hypothesis . . . is that the primary, fundamental determinant of a country’s long-run economic performance is its social infrastructure. By social infrastructure we mean the institutions and government policies that provide the incentives for individuals and firms in an economy.
