Institutions ESG and the Productivity Divide: A Global Empirical Analysis of Output per Worker

This paper explores the cross-country variation in output per worker, focusing on institutional quality as a foundational determinant of productivity. Utilizing panel data for 80 countries from 2000 to 2022 and a newly constructed Social Infrastructure Index (SII), we employ fixed-effects and two-stage least squares (2SLS) regressions to identify the causal impact of governance on productivity. Our findings show that a one-point increase in the SII is associated with a 4.98% rise in output per worker, controlling for capital intensity and educational attainment. To reinforce these results, we apply Synthetic Control Methods (SCM) to three country case studies—Egypt, Qatar, and Rwanda—demonstrating productivity gains of 6–12% following institutional reforms. This study extends the literature by integrating ESG dimensions into institutional analysis and presenting a transparent, replicable framework for measuring and evaluating governance-driven productivity. The results inform current debates on inclusive growth, state capability, and sustainable development strategies.