Does Governance Matter?Some Evidence from Indian States

Sudip Ranjan Basu

Development and Comp Systems from University Library of Munich, Germany

Abstract: This paper attempts to propose a methodology to combine different dimensions of governance indicators into a composite index. The governance index is computed as the weighted average of principal components of the standardized governance indicators, where weights are variances of successive principal components. Since the notion of good governance is multi-dimensional, it is conceptualised as a goal and as a process that accelerates growth, equity and human development potential. We therefore estimate the governance index on the basis of five indicators, such as crime rates, riots, industrial disputes and strikes, Gini index, and debt-income ratio. Then we propose to explore whether the quality of governance determines development outcomes such as life expectancy, literacy, infant mortality rate and per capita income (logarithms of), within the panel data model framework. The evidence from 16 major Indian states (from state/regional level) strongly suggests that better quality of governance leads to better development outcomes.

Keywords: Governance; Development; Index; Panel Data (search for similar items in EconPapers)
JEL-codes: C0 N4 O1 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2005-09-08
New Economics Papers: this item is included in nep-cwa and nep-geo
Note: Type of Document - pdf; pages: 38 . pdf format
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0509008

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