Assessing the evidence of the impact of governance on development outcomes and poverty reduction

This paper synthesises academic and donor research on the impact of governance work on poverty reduction and development outcomes. There is a large body of work on the critical importance of good governance in developing countries which argues that good governance has both intrinsic and instrumental developmental value. The introduction charts the historical emergence of ‘the good governance agenda’ from the early 1990s to the present day, through narrow technical understandings of governance reform, to the concept of ‘good enough governance’, and on to current wider emphases on political economy approaches to governance. The individual chapters give overviews of research on the developmental impact of different areas of governance work: democratisation, justice and rule of law, corruption, decentralisation, public administration reform and public financial management.

Given the broad consensus on the importance of governance for development, these chapters present a mixed picture, showing that governance reforms have not always resulted in the expected improvements in development outcomes and poverty reduction. This is often argued to be because the success of governance reforms is often conditional on political factors. Other clear messages from the research are that bad governance impacts negatively on the poor and institutions matter for growth and poverty reduction. Policy implications from the research are that donors must take a long-term perspective as change to governance institutions takes place over long time horizons. Donors should also give more attention to the demand-side of governance, rather than focusing exclusively on top-down approaches to reform, as results have often been promising where citizens have been brought into governance interventions.

Democratisation

Democratic states are neither the best nor the worst performers when it comes to economic performance and poverty reduction, and there is evidence to show that democratic systems prevent the worst humanitarian crises from occurring. Over long timeframes, it would seem that consolidated democratic regimes enjoy higher quality governance, are able to promote greater levels of economic growth and institute pro-poor social policies.

Justice and rule of law

The literature widely acknowledges the negative impact on the poor of a weak rule of law, in particular inadequate property rights and dispute resolution mechanisms. However, there is little conclusive evidence that ‘supply-side’ rule of law promotion by donors has had an impact on poverty levels. On the ‘demand-side’ there are some positive case studies of attempts to improve poor people’s access to justice that might suggest that these can be a way of reducing poverty.

Corruption

To date, very little empirical evidence has been generated on the impact of anti-corruption initiatives on poverty levels, or development more widely. The main focus in the literature is on the link between corruption and economic growth, where the impact on poverty reduction is implicit and/or indirect. Many anti-corruption initiatives have yet to demonstrate significant success.

Decentralisation

There is a wealth of material that argues that decentralisation can have a very positive effect on development by improving state efficiency, responsiveness, accountability and citizen voice. However, there is a lack of robust empirical research to support these claims and many academic studies are negative about the overall developmental impact of decentralisation.

Throughout the literature there is a strong emphasis on the importance of the political context in determining success.

Public administration reform

There is general consensus in the donor and academic literature that there is a strong link between improvements in the efficiency and accountability of public institutions and developmental outcomes. However, the potential of reform has not always been realised due to contextual factors and to poor design of interventions. There are, however, a few examples of reform impacting on development and some evidence of donor impact in this area.

Public financial management

Improving public financial management is important to enable countries to reach their developmental goals. However, the impact of PFM on poverty ultimately depends on the quality and pro-poor focus of government objectives and policies themselves. The link between PFM and development is therefore often argued for intuitively, rather than using empirical evidence. However, there are case study examples where PFM reform has furthered the MDGs, for example via improvements in budgetary allocations to the social sectors. In the past PFM reforms have been criticised for relying on technical solutions when the primary problems are often political. However, there is recent evidence that PFM reform is improving in developing countries.

Suggested citation

Earle, L. & Scott, Z. (2009). Assessing the Evidence of the Impact of Governance on Development Outcomes and Poverty Reduction. Birmingham, UK: GSDRC, University of Birmingham.