Since the 1990s, the concept of good governance has taken center stage in development thinking and practice. While it has been increasingly viewed as a key ingredient for development, the decade also witnessed a renewed focus on poverty reduction as the major goal of development. This paper reviews the concepts of good governance and pro-poor growth, and develops a conceptual framework that specifies the linkages between different aspects of the two.
The paper uses the framework developed to review a range of quantitative cross-country studies that include measures of governance as independent variables and focuses on the dependent variable in at least two of the three dimensions of pro-poor growth: poverty, inequality, and growth.
The overall finding of the paper is that governance indicators that capture a sound decision-making environment for investment and policy implementation, such as political stability and rule of law, are associated with growth but provide mixed results in regard to poverty reduction. The paper also discovers that governance indicators that refer to transparent political systems, such as civil liberties and political freedom, tend to be conducive for poverty reduction, but the evidence is rather mixed, and the relationship of these variables with growth remains unclear.