Does better governance help economic growth? The World Bank certainly believes that countries can derive a very large "development dividend" from better governance. But a recent Kyklos article, currently free to download, suggests otherwise. Here is the abstract for Does Governance Matter? Yes, No or Maybe: Some Evidence from Developing Asia by M.G. Quibria of the Asian Development Bank:
This paper seeks to explore the relationship between economic growth and governance performance in Asian developing economies. This exploration yields some interesting conclusions. First, notwithstanding its tremendous economic achievements, the state of governance in Asia is not stellar by international comparison. Indeed, the majority of these countries seem to suffer from a governance deficit. Second, contrary to our expectations, data do not suggest any strong positive link between governance and growth: paradoxically, countries that exhibit surpluses in governance on average grew much slower than those with deficits. The paper ends with some conjecture about this apparent paradox.