Abstract
The main aim of this chapter is to explain how institutional change, measured with a set of governance indicators, can support the reduction of poverty and inequality in society that is an essential prerequisite for supporting economic growth of nations. This chapter shows a study that investigates 191 countries to clarify the relationships between institutional variables and socioeconomic factors of nations with different levels of development. Central findings suggest that a good governance of institutions supports a reduction of poverty and income inequality in society. In particular, results of this study show that the critical role of good governance for reducing inequality and poverty has a effect in countries with stable economies higher than emerging and fragile economies. Overall, then, the study described in this chapter reveals that countries should focus on institutional change directed to improve governance effectiveness and rule of law that can reduce poverty and inequality, and as a consequence support the long-run (sustainable) socioeconomic development of nations.
Keywords
- Institutional change
- Governance indicators
- Economic governance
- Government effectiveness
- Rule of law
- Income inequality
- Equality
- Poverty
- Developing countries
- Institutional framework
- Governance approach
- Institutions
- Society and institutions
- Institutional theory
- Institutional development
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Appendices
Appendices
1.1 Appendix A
Description of Good Governance Indicators |
Kaufmann Voice and Accountability index in 2000 captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media. Range [−2; +2] from min to max level. |
Kaufmann Political Stability and Absence of Violence/Terrorism 2000 measures perceptions of the likelihood of political instability and/or politically motivated violence, including terrorism. Range [−3; +2] from min to max level. |
Kaufmann government effectiveness 2000 captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies. Range [−2; +2] from min to max level. |
Kaufmann government regulatory quality 2000 detects perceptions of the ability of government to formulate and implement sound policies and regulations that permit and promote private sector development. Range [−2; +2] from min to max level. |
Kaufmann Rule of Law 2000 captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular quality of contract enforcement, property rights, police, and courts that also reduce the likelihood of crime and violence. Range [−2; +2] from min to max level. |
Kaufmann Control of Corruption 2000 measures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests. Range [−1; +3] from min to max level. |
Description of Socioeconomic Indicators |
Income inequality is measured with Gini coefficient 2004 (World Bank 2013). Gini index measures the extent to which the distribution of income (or, in some cases, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution. A Lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting with the poorest individual or household. The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. Thus, a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. |
Poverty with Human poverty index value (%) 2004 (UNDP 2019). This index measures how people experience poverty in multiple and simultaneous ways. It identifies how people are being left behind across three key dimensions: health, education, and standard of living, comprising ten indicators. Data of this index is for N = 97 countries having a range from 2 (low poverty) to 65.5 (high poverty, e.g., many African countries: Ethiopia, Mali, Niger, etc.). |
Gross Domestic Product (GDP) per capita based on purchasing power parity (PPP) 2007. GDP is gross domestic product converted to international dollars using purchasing power parity rates. An international dollar has the same purchasing power over GDP as the US dollar has in the United States. |
Annual population growth rate for year t is the exponential rate of growth of midyear population from year t−1 to t, expressed as a percentage (average 1975–2002). Population is based on the de facto definition of population, which counts all residents regardless of legal status or citizenship. |
The Human Development Index (HDI) 2004 is a summary measure of average achievement in key dimensions of human development: having a long and healthy life, being knowledgeable, and having a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions. |
1.2 Appendix B
Classification of Fragile States in the Year 2006 |
Fragile Countries |
Afghanistan, Algeria, Angola, Azerbaijan, Bangladesh, Bolivia, Bosnia and Herzegovina, Burundi, Central African Republic, Chad, Colombia, Congo Dem. Rep., Congo, Rep., Cote d’Ivoire, Ecuador, Egypt, Eritrea, Ethiopia, Georgia, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, India, Indonesia, Iran, Islamic Rep., Iraq, Jordan, Kenya, Kyrgyz Republic, Lebanon, Liberia, Macedonia, Myanmar, Nepal, Nigeria, Pakistan, Papua New Guinea, Peru, Philippines, Russian Federation, Rwanda, Saudi Arabia, Somalia, Sri Lanka, Sudan, Syrian Arab Republic, Tajikistan, Thailand, Togo, Turkey, Uganda, Uzbekistan, Venezuela, Yemen, Zimbabwe |
Intermediate Countries |
Albania, Argentina, Armenia, Bahrain, Belarus, Belize, Benin, Brazil, Bulgaria, Burkina Faso, Cambodia, Cameroon, China, Comoros, Croatia, Cubism Cyprus, Djibouti, Dominican Republic, El Salvador, Equatorial Guinea, Fiji, France, Gabon, Gambia, Ghana, Greece, Grenada, Honduras, Israel, Italy, Jamaica, Kazakhstan, Korea Dem. Rep., Korea Rep., Kuwait, Lao PDR, Lesotho, Libya, Madagascar, Malawi, Malaysia, Mali, Mauritania, Mexico, Moldova, Morocco, Nicaragua, Niger, Panama, Paraguay, Poland, Romania, Senegal, Sierra Leone, Solomon Islands, South Africa, Spain, Suriname, Swaziland, Tanzania, Trinidad and Tobago, Tunisia, Turkmenistan, Ukraine, United Kingdom, United States, Vietnam, Zambia |
Stable Countries |
Andorra, Antigua and Barbuda, Australia, Austria, Bahamas, Barbados, Belgium, Bhutan, Botswana, Brunei Darussalam, Canada, Cape Verde, Chile, Costa Rica, Czech Republic, Denmark, Dominica, Estonia, Finland, Germany, Hungary, Iceland, Ireland, Japan, Kiribati, Latvia, Liechtenstein, Lithuania, Luxembourg, Maldives, Malta, Mauritius, Micronesia, Monaco, Mongolia, Mozambique, Namibia, Netherlands, New Zealand, Norway, Oman, Palau, Portugal, Qatar, Samoa, San Marino, Sao Tome and Principe, Seychelles, Singapore, Slovak Republic, Slovenia, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sweden, Switzerland, Tonga, United Arab Emirates, Uruguay, Vanuatu, Marshall Islands, Nauru, Taiwan, Tuvalu |
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Coccia, M. (2021). How a Good Governance of Institutions Can Reduce Poverty and Inequality in Society?. In: Faghih, N., Samadi, A.H. (eds) Legal-Economic Institutions, Entrepreneurship, and Management . Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-030-60978-8_4
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