 The known unknowns of governanceRodolphe Desbordes and Gary Koop No 1407, Working Papers from University of Strathclyde Business School, Department of Economics Abstract: Empirical researchers interested in how governance shapes various aspects of economic development frequently use the Worldwide Governance indicators (WGI). These variables come in the form of an estimate along with a standard error reflecting the uncertainty of this estimate. Existing empirical work simply uses the estimates as an explanatory variable and discards the information provided by the standard errors. In this paper, we argue that the appropriate practice should be to take into account the uncer- tainty around the WGI estimates through the use of multiple imputation. We investigate the importance of our proposed approach by revisiting in three applications the results of recently published studies. These applications cover the impact of governance on (i) capital flows; (ii) international trade; (iii) income levels around the world. We generally find that the estimated effects of governance are highly sensitive to the use of multiple imputation. We also show that model misspecification is a concern for the results of our reference studies. We conclude that the effects of governance are hard to establish once we take into account uncertainty around both the WGI estimates and the correct model specification. Keywords: governance; multiple imputation (search for similar items in EconPapers) Published Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1407 Access Statistics for this paper More papers in Working Papers from University of Strathclyde Business School, Department of Economics Contact information at EDIRC. |
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