Country characteristics and change in government quality, 1996-2005

This study investigates the determinants of changes in government quality over time. Cross-country OLS and 2SLS regressions were used to analyze statistical relationships between economic, political, and social country characteristics and the change in four World Bank measures of governance between 1996 and 2005. Initial GDP per capita and GDP per capita growth over the period were the strongest predictors of the change in government quality. Mor e democratic countries and those in less tropical latitudes also experienced larger than average improvements in governance, while oil exporting countries and those with civil code legal systems performed comparatively worse. No robust relationship was found between ethnic fractionalization, educational attainment, or the level of foreign aid receipt and changes in government quality. The results indicate that economic development is the primary determinant of governance change, and that the most effective policies for raising government quality will be those that improve national economic outcomes.