Governance, Growth, and Development Decision-making - School of ...

standard time-inconsistency problems. But equally often, the motive
is to constrain not one’s own future behavior, but that of the rival
political group or of the opposition in case they assume power. Effective
as this may be as growth policy in the short run, the broader
governance implications of such commitments are worrisome.
Or consider the establishment of foreign trade zones where
firms are allowed to operate under different fiscal regimes and
less burdensome labor laws. Once again, these may be effective as
growth policies, but they raise important questions where governance
standards are concerned.
There are no obvious and clear-cut solutions when such tradeoffs
arise. The best that one can hope is that policy advisors and
their principals make their choices while being fully cognizant of
them.
6. Concluding Remarks
Good governance is good in and of itself. And it can also be good for
growth, when it is appropriately targeted at the binding constraint.
For most countries the “good governance” and the “governance for
growth” agendas are likely to differ substantially. Economists have
precious little to say about how to achieve the first of these, but
plenty to contribute to the second. From a growth standpoint, the
risk is that the governance agenda takes an independent life of its
own, and that it becomes divorced from the particular governance
challenges that are most closely linked to stimulating and sustaining
economic growth.
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Governance, Growth, and Development Decision-making