Governance quality and economic performance: empirical evidence from OECD countries

Governance quality is a concept that has been the subject of many recent studies and gained popularity in recent years. The concept of governance; It is defined as a multi-actor management model based on the rule of law, producing clear and predictable policies based on a strategic vision with its strong and institutional structure. Good governance is accepted as an indicator that provides some information about the economic, social and political dimensions of countries and allows countries to be compared with each other. Since states that are successful in terms of good governance indicators are seen to be successful in terms of economic development and development in general, good governance has become an extremely important concept for the efforts of developing states to enter the category of developed countries. Developed countries have to be successful and be at better levels not only in terms of economic performance, but also in areas such as democracy, human rights, freedom and law. Therefore, in today's conditions, it does not seem possible for countries to achieve a sustainable economic growth and development without increasing the quality of their governance indicators. The aim of this study is to determine the effect of governance quality indicators on the economic growth of OECD countries. In this respect, indicators such as political instability, freedom of expression and accountability, regulatory quality, government effectiveness, rule of law and control of corruption, which are among the Worldwide Governance Indicators in the World Bank database, are used in the study to represent the quality of governance. Data from the World Development Indicators in the World Bank database were used to represent the economic performance. Within the scope of the study, annual data for the period 2002-2021 belonging to 38 OECD member countries were used. In the econometric analysis phase, governance indicators were first subjected to factor analysis, and then the effect of governance indicators on economic growth was investigated through two separate dynamic panel regression models. The empirical findings and results provided evidence that the increases in governance performances for the countries covered in the study have a positive impact on their economic performance and that the quality of governance is an important determinant for economic growth. In addition, it provided various findings and conclusions related to the governance and economic performance of OECD countries.