Governance and inclusive development in developing countries : What matters?

Abstract: The objective of this article is to determine the effects of governance on inclusive development in a sample of 71 developing countries. We specify and estimate, respectively, a panel data model, fixed effects, generalized least squares, robustness with alternative measures of a country's stability, control of endogeneity using Lewbel's two-stage least squares method, quantile regression, and subregional heterogeneity over the period 1995-2017. Our results show that governance significantly and statistically improves inclusive development in developing countries. We obtain the same result for each regional area (SSA, MENA, SAS, EAP, and LAC). We propose that the governments of developing countries must promote democracy and good governance, strengthen judicial, legislative, and executive institutions, and intensify regional and international cooperation in order to guarantee political stability, foster a favorable economic climate, and attract foreign investment in a sustainable manner.