Is good governance necessary for good development? : an analysis of development projects performance and government effectiveness using macro data

Abstract

This study analyses the relationship between development aid and good governance in almost 150 countries in Africa, Asia, Europe, and South America from 2000 to 2020. It uses a quantitative research method to analyse if variation in government effectiveness in a country influences the probability of success of a development project implemented there. The data set used to carry out the empirical analysis consists of project performance ratings and government effectiveness percentile ranks taken from World Bank Data Repository. The results show that when we control for country fixed effects, which exploit within country variation, no statistically significant relationship exists between the project outcome and the effectiveness of government. These results have relevant policy implications for the framework of international development, which has echoes of post-colonial and post-imperial mindset as per modern theories of development. The results exploiting variation in projects within country, instead of across countries, suggest that the international development aid framework may be revised. The study aims to contribute to the existing literature on development. Specifically, using data from a large set of countries, the results of this project reinforce the findings established by the existing empirical literature suggesting that good governance has negligible impact on international development efforts.