Research than Morocco or Tunisia. These countries have been

Research Proposal

Assessment for
Academic Research and Writing

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The impact of Good Governance on Economic
Growth: Case of the North African Region.

 

 

 

     Amira Ben
Salem

[email protected]

 

 

 

 

 

 

 

I.       
Background to
research task :

 

Introduction: 

 

A growing number of publications and literature
has examined the link between institutions and Economic Growth.

This research aims to investigate the relation between institutional
quality and economic growth in four North African countries:  Morocco, Algeria, Tunisia
and Egypt.

 It is worth to mention that the first three countries
have a lot in common:

·        
An identical colonial heritage ( French occupation ) ,

·        
similar racial composition ( Arabs and Amazighs  ) ,

·        
Language (Arabic and Amazigh).

·        
French Language is still predominant in Business. Nevertheless, the use
of English has been growing steadily in recent years.

Egypt shares the Arabic
culture and Language, but differs in terms of its trade partners.

Both Morocco and
Tunisia have been following important economic reforms, including trade policy
reforms, since the second half of the 1980s. Thus, the divergence with the
experience of Algeria should provide some interesting ideas.

 In addition to that, the type of institutions
built by the French colonial administration in Morocco and Tunisia is
consistent with the proposition held in Acemoglu et al. (2003) in the sense that colonial powers (Europeans) ‘were
more likely to introduce extractive institutions in regions where they did not
plan to settle’.

Nevertheless, the
French colonial power planned to settle in Algeria and, annexed the country to
the French Territoire. According to
the contention in Acemoglu et al.,
Algeria should have emerged with better institutions. The historical facts
since independence in the early 1960s
indicate that this was not the case. In fact, Algeria has much worse
institutions than Morocco or Tunisia.

These countries have been adopting a range
of policy reforms for several decades. The most obvious are reforms related to
trade. Financial reforms gained a great deal of popularity back in the 1980s.

The Arab Spring of 2011
brought much political instability to Both Egypt and Tunisia and was caused
mostly by unemployment, corruption and aging dictatorship.

 Morocco and Algeria were relatively unaffected
by the unrest despite having similar problems.

.

The fact that some
policies may not lead the anticipated results because of the variance in
institutional quality among countries is not surprising.

 

Governance and
Institutions Literature:

 

 About the evolution of institutions in a
society, North (1991: 97) states that:

“They evolve incrementally, connecting the past to the
present, and the future; history in consequence is largely a story of
institutional evolution in which the historical performance of economies can
only be understood as a part of a sequential story. Institutions provide the
incentive structure of an economy; as that structure evolves, it shapes the
direction of economic change towards growth, stagnation, or decline.”

Economic institutions can be defined as ‘norms of
economic behavior’ (see for example Matthews 1986, and Nee and Ingram 1998).

Hall and Jones (1999) declare that the difference
between economic developments and productivity in different countries could be understood
essentially by the difference in social structure.

 ‘The central
hypothesis … is that the primary, fundamental determinant of a country’s
long-run economic performance is its social infrastructure. By social
infrastructure, we mean the institutions and government policies that provide
the incentives for individuals and firms in an economy’.

 In this regard
Kaufmann (2003) emphasis that economic development is not only related to the
macroeconomic situation  but to other
factors such as re quality of the institutional structure, independence of the
judiciary, level of corruption and the ease of doing business.

Similar  results
are also drawn by Roll and Talbott (2003), who conclude that about 80 percent
of differences in GNI per capita between different countries are explained  by such factors as property rights, political
rights, governance expenses, freedom of speech, etc., while negative effects
come from excessive administrative regulation, informal economy, trade
barriers, etc.

According to Khan (2007), developing countries inherit
a limited market infrastructure which demands reforming governance initiatives
to boost free market initiatives and raise production .Based on empirical
analysis, Khan (2007) argues for a substantial correlation between good
governance and an increase of income per capita, seeing good governance as an
important factor in economic growth.

 

Others were suspicious of this approach, stating that
this supposed correlation can be only theoretical and there is not enough
evidence to support it (Kurtz and Shrank, 2007). According to them the relation
between economic growth and good governance can be obvious only in developed
countries or in a very long period of time.

 

Governance Indicators:

 

In order to effectively measure the quality of these institutions, test
the claims that emphasis the importance of this factor in Economic growth and development
strengthen governance or choose target aid, we need measurements.

The World Bank researches developed aggregate Governance Indicators from
available sources. The 1999 papers “Aggregating Governance” and “Governance
Matters” presented the Worldwide Governance Indicators. (Kaufmann et al.,
1999a; Kaufmann et al., 1999b).

The indicators were presented to match what the authors consider to be
“fundamental governance concepts.” (Kaufmann et al., 1999b) Most recently, the
indicators were defined as:

1.    Voice and Accountability (VA), 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 free media.

 

2.    Political stability and absence of violence / terrorism  (PV), perceptions of
the likelihood that the government
will be destabilized or overthrown by unconstitutional or violent means,
including political violence or terrorism. It is also the capacity of the
government to formulate and implement policies.

 

3.    Government effectiveness (GE), 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.

 

4.    Regulatory quality (RQ), the ability of the
government to formulate and implement
sound policies and regulations that permit and promote private sector
development.

 

5.    Rule of law (RL), the extent to
which agents have confidence in and abide by the rules of society, and in particular the quality of contract
enforcement, the police, and the courts, as well as the likelihood of crime and
violence.

 

6.    Control of corruption (CC), 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.

 

 The indicators
are not meant to be considered as absolute measures of governance, but are
measures of a specific country’s relative rank with respect to that indicator.

 Most are
published as World Bank Working Papers, but one has been published in a
peer-reviewed journal. (Kaufmann et al. 2004, 2005, 2006a; Kaufmann et
al. 1999a, 2002; Kaufmann et al., 1999b).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    II.    research Question :

 

The Long term goal of this research is to investigate whether there is a
relationship between Good Governance and Economic Growth in these fourth North
African countries (Algeria, Egypt, Morocco and Tunisia).

This long term goal will be analyzed by answering the following questions:

 

1.      What are the reasons behind the disappointing economic performance of
North African countries despite many recent reforms?

2.      What are the indicators of Governance?

3.      Is there a correlation between Good Governance and Economic Growth in the
North African region?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     III.     Methodology : (2 – 3
pages )

 

This research paper seeks
to identify the correlation between good governance and economic growth in the 4
selected North African countries.

The methodological approach of this article is straight forward and as
follows:

·        
after  revising literature  , the research  focuses  through descriptive interpretation the data on
economic growth in the 4 North African  countries  ( Algeria , Morocco, Tunisia and Egypt ) and for
the same period 1996-2016 .

 

·        
 The paper presents an econometric
model, which measures the supposed relation between good governance and
economic growth for different countries in the Western Balkans.

 

·        
From the statistical point of view, the article uses the databases from
:

 

ü  World Bank (World Governance Indicators – WGI),

ü  World Development indicators WDI.

ü  International Monetary fund.  

 

 

·        
The research prepared work does not seeks  to draw general conclusions about the
relationship between Economic Growth and Governance Quality  , but only to illustrate the above
correlation in the North African region .

 

The following econometric model is used:

 

Grgdp / cap = a + log GDP1996 +?Acc + ?Stb + ?Eff + ?Rre + ?Law + ?Crr +

 

?1extgdlog + ?2 gcflog + ?3gdpoecd

 

In this model the indicators of good
governance are those set by the World Bank

·        
Grgdp/cap represents economic growth (growth of GDP
per capita)

·        
logGDP1996 is the logarithm of the GDP per capita for
the base year of the study (1996); inclusion of this noted variable in the
model

·        
Acc represents the governance indicator that
reflects the ‘governance accountability’ (Voice and Accountability);

·        
Stb is an indicator representing ‘political
stability and lack of violence’ (Political Stability and no Violence);

·        
Eff is the indicator of ‘governance
efficiency’ (Governance Effectiveness);

 

·        
Rre is the indicator which expresses the ‘administrative
and regulatory framework’ (Regulatory Quality); Law is
the index that characterizes the level of ‘law enforcement’ (Rule of Law);

·        
Crr represents index of corruption’s level
‘(Control of Corruption).

·        
In this model three other variables are
included, which are considered to affect in a considerable way economic growth,
although not directly related to governance):

·        
extgdlog, it is the logarithm of trade opening
index of the economy, which shows the percentage
of exports and imports to total GDP;

·        
gcflog, which is the logarithm of the ration of
capital formation to GDP

·        
gdpoecd, which represents economic growth of GDP
per capita in OECD countries. I

·        
The inclusion of extgdlog based on the assumption that the more an economy is open
to international markets, the more substantial its growth will be, while the
variable which is linked to the capital formation, gcflog, presupposes that the growth of capital formation to GDP
will affect faster economic growth. Further,

·        
gdpoecd variable is included based on assuming
that economic development of Western Balkan countries, as relatively small
economies, is affected by the economic growth on developed countries

 

The data will be preceded though various statistical
tests on STATA or SPSS, and results will be interpreted accordingly.

 

 

 

 

 

 

 

 

 

 

                       
I.     Time Scale :

 

 

                                    
II.        
Deadline

Activity

Remarks

February 28th
, 2018

Master thesis
registration.
Complete literature
searches
Ext
Look for adequate
database

 
Some docs are already at
hand.
 

By 30 of March 2018

Complete literature
categorizing and start writing your thesis draft.
Database approved or
rejected by supervisor

 

By 30th  of April 2018

Continue writing the
thesis.
Conduct statistical
tests
 
If database is not
approved by the supervisor, start working on a qualitative research.

 

April – August 2018

Writing

Along full-time work.

August 31th , 2018

Last deadline
 

2 paper-copies

 

 

 

 

                    
III.  Resources Needed :

 

 

·        
The databases
needed are available on World Bank Database (WB) and International Monetary
fund database (IMF). In form of Excel sheet, CSV, Tabbed TXT.

 

·        
Academic Publications
and books are available online.

 

·        
Feedbacks
from the supervisor which are extremely crucial.

 

 

·        
STATA or SPSS
will be used to conduct statistical tests.

 

 

 

 

 

 

 

 

 

 

 

                   
IV.  Initial
Bibliography :

 

  Tony Addison , Mina Baliamoune?Lutz ( 2003 ). ‘ Institutional Qaulity ,
Reforms and Integration in the Maghreb  ,
United Nations University , World Institute for Development  , Discussion Paper No. 76

 

Acemoglu, Daron, Simon Johnson, and James A. Robinson
(2001). ‘The Colonial Origins of Comparative Development: An Empirical
Investigation’. American Economic Review, 91: 1369-401.

North, Douglass C. (1991). ‘Institutions’. Journal of Economic Perspectives, 5: 97-112.

Nee, Victor, and Paul Ingram (1998). ‘Embeddedness and Beyond:
Institutions, Exchange and Social Structures’, in M. Brinton and V. Nee (eds.),
The New Institutionalism in Sociology. New York: Russell Sage Foundation,
19-45.

 

Acemoglu, Daron, and James A. Robinson (2002).
‘Economic Backwardness in Political Perspective’. NBER Working Paper 8831.
Cambridge, MA: National Bureau of Economic Research.

Acemoglu, Daron, Simon Johnson, and James A. Robinson
(2002). ‘Reversal of Fortune: Geography and Institutions in the Making of the
Modern World Income Distribution’. Quarterly
Journal of Economics, 117 (4):1231-94.

Acemoglu, Daron, Simon Johnson, and James A. Robinson
(2003). ‘Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and
Growth’. Journal of Monetary
Economics, 50: 49-123.

M.A. Thomas
(2006).’  What do the worldwide
Governance Indicators Measure ?’, The Paul H. Nitze
School of Advanced International Studies , The Johns Hopkins University ,
Draft of October 2006.

Kaufmann, D., A. Kraay
and Zoido-Lobatón (1999a) ‘Aggregating Governance Indicators’. Washington,
D.C.: World Bank.

Kaufmann, D., A. Kraay and Zoido-Lobatón (2002) ‘Governance Matters II:
Updated

Indicators for 2000/01’. Washington, D.C.: World Bank.

Kaufmann, D., A. Kraay and P. Zoido-Lobatón (1999b) ‘Governance
Matters’.

Washington, D.C.: World Bank.

Roll,
Richard and JohnTalbott (2003) ‘Political and Economic Freedoms and
Prosperity’, Journal of Democracy
14(3): 75-89.

Kurtz,
Marcus J. and Andrew Schrank (2007) ‘Growth and Governance: Models,

Measures,
and Mechanisms’, Journal of politics
69(2): 538-554.

 

Primoz
Manfreda (2017) , ’10 reasons for the Arab Spring ‘,ThoguhtCo

Engjell Pere (2015) .’ The impact of
good governance in the economic development of Western Balkan countries’. European Journal of Government and Economics Volume 4, Number 1

Khan,
Mushtaq (2007) ‘Governance and Development: The Perspective of Growth-enhancing
Governance’, DESA Working Paper 54.

Hall, Robert
E. and Charles I.Jones (1999) ‘Why Do Some Countries Produce so Much More
Output per Worker Than Others?’, Quarterly
Journal of Economics 114(1): 83-116.

Kaufmann,
Daniel (2003) ‘Governance Redux: The Empirical Challenge’, Working paper, MPRA Paper 8210.

.