Good Governance and Economic Growth: A Contribution to the Institutional Debate about State Failure in Middle East and North Africa

Abstract

Several econometric studies (Kauffman, Knack) tested the relationship between good governance in the sense of "market-enhancing governance" (stimulus institutions market) showing a positive relationship between good governance and economic growth. However, a good governance policy allows developing countries to achieve minimum economic growth and political reforms in order to reach a level of development similar to that of industrialized countries? In this article, we focus on the definition and the development on the concept of good governance by the World Bank and the criticism formulated by Mushtaq Khan , who reconstructed the notion of governance in a broader sense, taking into account the capacity of states to drive structural change in the institutional, political, economic and social fields, in order to ensure long-term economic growth. Our contribution is to examine the concept of good governance and the failure of states taking into account the level of development and governance capacity based on a structure and distribution of political power that evolves over time and may or may not be positive for growth. The assumption we make here is that the so-called good governance policies are relevant only if countries reach an adequate level of economic and social development that enable institutions of good governance to boost growth.