The impact of governance on economic growth: spatial econometric approach

Abstract

Purpose: This paper investigates the impact of governance on economic growth, considering the spatial dependence between countries. Design/methodology/approach: The study employs spatial regression models to estimate the impact of governance on economic growth in a sample of 116 countries worldwide in 2017. Findings: The findings imply that the influence of governance on economic growth is statistically significant. Moreover, if all other economic control variables are constant, 1% increase in governance raises the economic growth on average by 1% at 10%, 5% and 1% significance levels, respectively. Furthermore, each country's rise in economic growth favorably and substantially influences the economic growth of its bordering nations. The unobserved characteristics or similar unobserved environments in adjacent countries also affect its economic growth. Originality/value: This study adds to the discussion and investigation of the influence of governance on economic growth by considering the spatial dependence between countries, which is lacking in the literature.