GOVERNANCE AND ECONOMIC GROWTH IN DEVELOPING COUNTRIES: A PANEL THRESHOLD REGRESSION ANALYSIS

Nabil Alimi¹ and Lassad Ben Dhiab²

¹University of Tunis El Manar, Faculty of Economics and Management of Tunis, Tunisia
²Higher Institute of Management of Gabes, Tunisianis El Manar, Faculty of Economics and Management of Tunis, Tunisia

This study is aimed at analyzing the effect of the governance index and the governance components index on economic growth in 48 developing countries over the period 2002-2020. Corruption control, the effectiveness of the government, political stability, and regulatory quality are but a few of the many variables taken into account by the governance components index. The findings of the study show that governance has an asymmetric effect on economic growth. Moreover, the results indicate that enhancing governance in developing countries can obstruct economic growth in them. This outcome should not surprise and cast doubt on the positive effects of sound governance on economic growth, as improving governance requires numerous resources currently lacking in these countries. Therefore, policymakers must boost economic growth at the initial stage so that they can identify resources for improving governance and capitalize on them as well.

Keywords: economic growth, governance, governance components, panel threshold regression model

JEL Classification: O43, D72, C24