Governance, Economic Reforms and Well-Being: Evidence from Developing Asia

Abstract

Economic reforms comprising macroeconomic and structural reforms were introduced in many developing economies including 'developing Asia' in the nineties. The aims of the reforms were to establish and reform market and political institutions, improve resources allocation and raise productivity of private sector activities and lastly incomes. The government's role was envisaged to be essentially restricted to undertaking governance role with the objective of enhancing overall economic well-being. In general, the reforms have led to improved economic growth rates and per capita incomes and reduction in poverty. Yet, several studies have noted increased inequalities and growing disparities since globalisation and reforms. Questions have emerged on the lack of any perceptible changes in improved human development outcomes such as child & maternal health, sanitation, rural electrification, access to safe drinking water and increased participation of women in the paid workforce despite region's high growth rates. In this study we examine the impact of the level of governance on economic well-being of the population in developing Asia against the backdrop of reforms. Our approach to the study primarily involves four steps. Firstly we build measures of governance based on several dimensions and categorize countries into those with high and low governance. Secondly, we conceptualise and develop measures of economic well-being or countries in the developing Asia and classify the countries into high and low well-being. Thirdly, we use econometric techniques to estimate relationship between levels of governance and levels of well-being. Finally, we explore determinants of the well-being.