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HomeDynamic effects of changes in governance quality
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This paper analyses the dynamic economic impact of changes in governance quality across six key dimensions. Using local projections, we examine whether these changes induce long-term growth effects or result in gradual level shifts in GDP per capita. The findings reveal significant but heterogeneous impacts. While Government Effectiveness, Rule of Law, and Control of Corruption act as drivers of sustained economic growth by permanently increasing long-run growth rates, dimensions like Regulatory Quality and Political Stability lead only to gradual level shifts, moving economic output to a higher permanent level without altering long-term growth rates. Historical analysis of governance changes highlights stark regional differences: Emerging Europe, Post-2004 EU Member States, and non-European developed countries have benefited substantially from governance improvements, whereas Pre-2004 EU Member States, non-EU developed European countries, and regions such as Central and South America, Africa, and Emerging Asia have exhibited comparatively weaker governance dynamics and, consequently, GDP per capita growth.
- Published:
- Corporate author(s): Directorate-General for Economic and Financial Affairs (European Commission)
- Themes: Economy — Finance
- Subject: econometrics , economic development , economic growth , governance , performance measurement , simulation
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| ISSN 2443-8022 | ISBN 978-92-68-40201-6 | DOI 10.2765/2740318 | Catalogue number KC-01-26-048-EN-N |
- Released on EU publications website:
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