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Globalisation and Governance in Africa: A Critical Contribution to the

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 A G D I Working Paper

WP/16/017

Globalization and Governance: A Critical Contribution to the Empirics

Simplice A. Asongu
African Governance and Development Institute,
P. O. Box, 8413,
Yaoundé, Cameroon
E-mail: [email protected] / [email protected]

Uchenna Efobi
Covenant University, Nigeria
E-mail: [email protected]

Vanessa S. Tchamyou
African Governance and Development Institute,
P. O. Box, 8413,
Yaoundé, Cameroon
E-mail: [email protected] / [email protected]

1
2016 African Governance and Development Institute WP/16/017

AGDI Working Paper

Research Department

Globalization and Governance: A Critical Contribution to the Empirics

Simplice A. Asongu, Uchenna Efobi & Vanessa S. Tchamyou

May 2016

Abstract

This study assesses the effect of globalisation on governance in 51 African countries for the
period 1996-2011. Ten bundled and unbundled governance indicators and four globalisation
variables are used. The empirical evidence is based on Generalised Method of Moments. The
following findings are established. First, on political governance, only social globalisation
improves political stability while only economic globalisation does not increase voice &
accountability and political governance. Second, with regard to economic governance: (i) only
economic globalisation significantly promote regulation quality; (ii) social globalisation and
general globalisation significantly advance government effectiveness and (iii) economic
globalisation and general globalisation significantly promote economic governance. Third, as
concerns institutional governance, whereas only social globalisation improves corruption-
control, the effects of globalisation dynamics on the rule of law and institutional governance
are not significant. Fourth, the impacts of social globalisation and general globalisation are
positive on general governance. It follows that: (i) political governance is driven by voice and
accountability compared to political stability; (ii) economic governance is promoted by both
regulation quality and government effectiveness from specific globalisation angles and (iii)
globalisation does not improve institutional governance for the most part. Theoretical
contributions and policy implications are discussed.

Keywords: Africa; Governance; Globalization

JEL Classifications: F10; F30; I30; O10; O55

2
1. Introduction
This study assesses the effect of globalisation on governance by taking into
consideration different dimensions of governance indicators and globalisation variables. It
asks two important questions: how does globalisation influence the perceived level of
governance in African countries; and what type of globalisation is most important for the
development of governance structure within African countries. The positioning of this inquiry
is based on two main motivations, notably: the prevailing African poverty and the role of
institutions in decreasing this poverty, while considering that globalisation plays an important
role in determining the quality of institutions; also, there is a lingering gap in the literature on
the interplay between globalisation and governance and this study intends to empirically
contribute in this regard.
Focusing on the prevailing rate of poverty in Africa, an April 15th World Bank report
in 2015 on the Millennium Development Goals (MDGs) has shown that poverty has been
decreasing in all world regions with the exception of Africa. About 45% of countries in Sub-
Saharan Africa (SSA) are substantially off-track from achieving the MDGs extreme poverty
target (Asongu & Kodila-Tedika, 2015; World Bank, 2015). This statistics sharply contrasts
with recent evidence that the continent has been enjoying over two decades of resurgence in
growth that began in the mid 1990s (see Fosu, 2015a, p. 44). Furthermore, good institutions
are crucial in fighting extreme poverty (Fosu, 2015bc)1 and the ineluctable process of
globalisation affects the quality of these institutions (Lalountas et al., 2011; Asongu, 2014)2.
Some of the channels through which globalisation affects countries’ institutional
structure include the transmission of social values and individual value formation that comes
from interactions with wide range of backgrounds and nationality (Jensen and Oster, 2009;
Berggren and Nilsson, 2015). These values affect individuals’ orientation to leadership and
can help shape perceptions of governance and institutional structure. Globalisation can also
shape checks and balances among countries, such that countries with poor governance are
checked by other countries that they have a relationship with. Overall, this action transmits
into improved governance structure in countries. More so, with the increasing rate of

1
The quality of institutions has been considerably documented to be connected to inclusive growth, notably in:
consolidating the foundations of social change (Efobi, 2015) and uplifting living standards via better economic
resource management (Fosu, 2013a, b; Fonchingong, 2014; Anyanwu and Erhijakpor, 2014).
2
It is interesting to note that globalisation is an ineluctable process which can be neglected only at the price of
endangering the prosperity of nations (Tchamyou, 2015).

3
technology advancement that drives globalisation, poor governance actions are able to be
tracked and checked. For instance, corrupt practices can now be easily monitored through
exchange of information among countries on individuals with corrupt track records. This is
also able to reduce the incidence of cross-country corrupt practices.
Despite the predicted positive impact of globalisation on countries’ governance
structure, there are controversies in literature on the impact of globalisation. For instance,
McMillan (2013) observes that the structural changes in Africa may not be caused by
globalisation. With technology advancement that comes with globalisation, corruption has
also been seen to escalate due to expanding networks of countries and individuals that make
complex corrupt practices that are difficult to spot (Goredema, 2009; Shapiro and Levine,
2015). An important observation from some of the critics of globalisation, in relation to
countries’ governance structure, is that conclusion is reached by considering globalisation as a
‘blanket’ concept – I.e. the interaction among countries. Such definition of globalisation does
not articulate some recent evolutions in the conception of globalisation and does not take into
consideration the possibility that there may be differential governance impact if globalisation
is disaggregated. Also, and on the other hand, the concept of governance has been employed
without a holistic appreciation and measurement. For instance, Kangoye (2013) used
‘corruption-control’ as ‘governance’. On the other hand, the concepts of political governance,
economic governance and institutional governance have been employed in the literature
(Kaufmann et al., 2007ab) without statistical validity. For instance, it is not appropriate to
employ the term political governance unless it translates a variable that is composed of voice
and accountability and political stability/no violence. We address this shortcoming by using
ten bundled and unbundled governance indicators, namely: political governance (voice &
accountability and political stability/no violence); economic governance (government
effectiveness and regulation quality); institutional governance (corruption-control and the rule
of law) and general governance (economic, political and institutional governances).
The rest of the study is structured as follows. Section 2 discusses the theoretical and
empirical evidence on the relationship between governance and globalisation on the one hand
and presents the testable hypotheses on the other hand. The data and methodology are
presented in Section 3, while Section 4 presents the empirical results and implications.
Section 5 concludes with future research directions.

4
2. Theoretical underpinnings and empirical evidence
This section is discussed in three main strands, namely: (i) the relationship between
globalisation and governance, (ii) factors linking globalisation to governance which is
engaged in three main streams and (iii) testable hypotheses.
On the nexus between globalisation and governance, the relevant question worth
considering is how globalisation influences the perceived level of governance in a country.
With regard to Klitgaard (1988), bad governance thrives when monopoly in power is
characterised with low accountability and discretion. Incentives to mismanagement and poor
governance are not very feasible in societies in which economic activities are predominantly
carried out within a perfect competition setting and no singular agent has the means of
affecting the price of the good/services he/she buys/sells. Within the same perspective, poor
governance can be curbed when economic rents rely on the discretionary power of some
public officials and/or when governments as well as economic activities of monopolistic
nature are within strict accountability rules (Asongu, 2014a). Political openness to the
protestant ethic is generally associated with higher levels of governance (Treisman, 2000;
Bonaglia et al., 2001). On the contrary, poor governance is more pervasive in the presence of
a federal state, when a country is less open to international trade or when her democratic
foundations are still immature (Klitgaard, 1998).
On the factors linking globalisation and governance, according to Krueger (1974) and
Bonaglia et al. (2001), trade and financial globalisation could shift the balance between the
costs and benefits via the following channels, which are engaged in three streams. The first
channel articulates activities of rent-seeking that are caused by restrictions to imports.
Contrary to quotas, imports, tariffs and other official permissions generated substantial
economic rents because of the monopolistic power they endow to legal importers. In efforts to
appropriate such rents, economic agents could compete legally or engage in rent-seeking of
illegal nature, black market participation, smuggling, bribery and corruption. It has been
demonstrated that such rent-seeking activities prompt an economy to operate at a low
threshold of its optimal, generate some form of divergence between social and private cost
and hence, engender some cost in welfare in addition to the tariff restrictions (Krueger, 1974).
In the studies that followed, the original idea of Kreuger was generalised to a theory of direct
unproductive profit-seeking activities (Bhagwati, 1982) and tariffs (Bhagwati & Srinivasan,
1980) in which more arguments were provided in substantiation of trade and capital openness.

5
 Gatti (1999) has assessed linkages between ‘trade restrictions’ and corruption. The
author disentangles two impacts of inward-linked policies on corruption, namely, the: foreign
competition effect and direct policy distortion. Substantial barriers to international
transactions have a direct effect on the ability of public officials to receive bribe from private
economic agents in exchange for policy distortion and foreign competition. Moreover, this
leads to reduced competition between foreign and domestic firms so that corruption, poor
management and rent seeking is high.
Second, evidence has been provided by Ades and Di Tella (1999) for the competition-
decreasing channel. The authors have argued that the level of rents from the markets in
particular and in general terms, determine the intensity of aspects of poor governance like
corruption within an economy. They have further hypothesized that because of changes in the
size of rents due to variations in the intensity of competition, competition could have varying
impacts on corruption. On the one hand, substantial rents consequent from an environment
characterised with low competition can augment the quantity that bureaucrat can obtain as
bribes. On the other hand, within such a framework, a society would benefit more by
increasing the monitoring and accountability of its bureaucracy. The authors suggest that
calculating the correct net effect sign of aspects of bad governance (like corruption) is
relevant because of its opposing tendencies. According to the authors, Nigeria illustrates a
good example of the positive association between rents and corruption. For more than thirty
years, about 80% of the government’s income has been traceable to petroleum exports.
Booms in imports and construction have been exclusively favourable to the ruling elite of
political parties, hence validating the hypothesis of the connection between rents and bad
governance.
A third channel that connects globalisation to governance acknowledges differences in
the cost of monitoring public agents because of the substantial level of international
integration (Wei, 2000). The underpinning logic here is that enhancing institutional quality
and its capacity to improve governance standards substantially depends on the resources that
are devoted for the purpose. Accordingly, if a society allocates more in the consolidation of
existing institutions and/or building of new ones, more rewards can be expected in terms of
lower costs and/or higher benefits. Assuming that compared to domestic producers, foreign
producers can more easily divert their investments or exports from one national market to
another, it is reasonable to expect that corruption and bad governance are more detrimental to
international transactions than to domestic transactions. The differential impact of corruption
6
induces strong incentives for better governance. Hence, compared to an economy in isolation
or autarky, an open economy is more likely to devote more resources to promoting good
governance with increasing globalisation.
Lalountas et al. (2011) have shown that when faced with globalisation, higher-income
countries are more concerned about the social and political dimensions of globalisation and
hence, the they benefit from improved corruption-control standards. Conversely, lower-
income countries are more focused on the economic dimension of globalisation; hence the
incidence on corruption is less apparent. The conclusions of Lalountas et al. (2011) in
developing countries have been partially confirmed in African countries by Asongu (2014a).
The current inquiry extends the underlying literature within three main perspectives. First, we
bundle and unbundle institutions using ten governance indicators. It is interesting to note that
the underlying studies are exclusively based on the corruption aspect of institutions. Second,
the empirical strategy is based on Generalised Method of Moments (GMM) with forward
orthogonal deviations as opposed to the Instrumental Variable Two-Stage-Least Squares used
by the underlying authors. Third, our conception of globalisation is more holistic because
social, political, economic and general dimensions of globalisation are critically engaged.
In the light of the above contribution, the following testable hypotheses are
investigated in the empirics.

Hypothesis 1: Economic, social and political globalisations improve political governance and
its constituents (voice & accountability and political stability/no violence).

Hypothesis 2: Economic, social and political globalisations improve economic governance

and its constituents (government effectiveness and regulation quality).

Hypothesis 3: Economic, social and political globalisations improve institutional governance

and its constituents (rule of law and corruption-control).

Hypothesis 4: Economic, social and political globalisations improve general governance.

3. Data and Methodology

3.1 Data
This paper assesses a panel of 51 African countries with data from Dreher et al.
(2010), World Development and World Governance Indicators of the World Bank for period
1996-2011. The sampled periodicity is constrained by data availability. The dependent
variables which are from World Governance indicators are: political governance (consisting

7
of political stability/no violence and voice & accountability); economic governance (entailing
government effectiveness and regulation quality); institutional governance (made of
corruption-control and the rule of law) and general governance (including political
governance, economic governance and institutional governance). The bundling exercise
which is done by principal component analysis is discussed in Section 3.1.2.
The independent variables of interest are globalisation indicators from Greher et al.
(2008) and include: social globalisation, economic globalisation, political globalisation and
general globalisation. The control variables from World Development Indicators are: Gross
Domestic Product (GDP) growth; foreign aid, public investment, inflation and the lagged
dependent variable. We observe from a preliminary assessment that controlling for more than
four variables leads to instrument proliferation that biases estimated models.
Consistent with Asongu and Nwachukwu (2016a), we expect GDP growth to
positively affect governance because higher-income nations have been documented to be
associated with better governance structures. According to the same authors, chaotic inflation
should reduce governance standards because inter alia, it may be associated with: (i) political
instability, (ii) high corruption by public officials to compensate for decreasing purchasing
power and (iii) disrespect of the rule of law. The effects of public investment and foreign aid
on governance are debatable. For instance, whereas Okada and Samreth (2012) have
established a negative nexus with corruption in developing countries, Asongu and
Nwachukwu (2016b) have concluded on negative effects from foreign aid to the six good
governance indicators from Kaufmann et al. (2010). The effect of public investment depends
on among others, the governance dynamic and how disbursed funds are managed. For
instance, funds destined to improve public commodities may improve economic governance
whereas if the disbursements of underlying funds are linked to mismanagement and
corruption, the effect on institutional governance is likely to be negative.
The definition and sources of variables is provided in Appendix 1, the summary
statistics in Appendix 2 while the correlation matrix is disclosed in Appendix 3. As apparent
in Appendix 3, some of the control variables are not used because of concerns of
multicollinearity. Accordingly, in addition of the discussed issue of overidentification or
instrument proliferation when more than four control variables are employed, some control
variables are not employed because of the high degrees of substitution with selected control
variables. The unused control variables include: secondary school enrolment; mobile phone
penetration and population growth.
8
 3.2 Methodology
3.2.1 Principal Component Analysis (PCA)
The paper uses PCA to bundle the six governance variables from Kaufmann et al.
(2010) into four composite variables, namely: political, economic, institutional and general
governances. This technique has been applied in recent African institutional literature (see
Asongu & Nwachukwu, 2016a). The PCA is a method in statistics that is used to reduce a set
of highly correlated indicators into a smaller set of uncorrelated composite variables called
principal components (PCs). These PCs are representative of a substantial variation or in the
original dataset. Within this framework, six governance indicators are reduced into a general
governance indicator or a single common factor. The resulting governance indicator
represents three governance indicators, namely: political (voice & accountability and political
stability), economic (regulation quality and government effectiveness) and institutional
(corruption-control and the rule of law) governances. Institutional governance is the respect
by citizens and the State of institutions that govern interactions between them. Economic
governance is the formulation and implementation of policies that deliver public goods and
services. Political governance is the election and replacement of political leaders.
The criterion used to retain common factors is from Jolliffe (2002) and Kaiser (1974).
The authors recommend that only common factors that have an eigenvalue that is higher than
the mean or one should be retained. From Table 1 it is apparent that General governance
(G.Gov) has an eigenvalue of 4.787 and represents more than 79% of variability in the six
governance indicators. Within the same framework, institutional governance (Instgov),
political governance (Polgov) and economic governance (Ecogov) have total variations
(eigenvalues) of 93.3%, 82.3% and 93.1% (1.867, 1.647 and 1.863) respectively.
Table 1: Principal Component Analysis (PCA) for Governance (Gov)
Principal Component Matrix(Loadings) Proportion Cumulative Eigen
Components Proportion Value
VA PS RQ GE RL CC
First PC (G.Gov) 0.385 0.370 0.412 0.426 0.440 0.412 0.797 0.797 4.787
Second PC 0.093 0.850 -0.364 -0.343 0.007 -0.140 0.072 0.870 0.437
Third PC 0.862 -0.179 0.122 -0.192 -0.182 -0.373 0.058 0.929 0.353

First PC (Polgov) 0.707 0.707 --- --- --- --- 0.823 0.823 1.647
Second PC -0.707 0.707 --- --- --- --- 0.176 1.000 0.352
First PC (Ecogov) --- --- 0.707 0.707 --- --- 0.931 0.931 1.863
Second PC --- --- -0.707 0.707 --- --- 0.068 1.000 0.137
First PC (Instgov) --- --- --- --- 0.707 0.707 0.933 0.933 1.867
Second PC --- --- --- --- -0.707 0.707 0.066 1.000 0.132

9
P.C: Principal Component. VA: Voice & Accountability. RL: Rule of Law. R.Q: Regulation Quality. GE: Government Effectiveness. PS:
Political Stability. CC: Control of Corruption. G.Gov (General Governance): First PC of VA, PS, RQ, GE, RL & CC. Polgov (Political
Governance): First PC of VA & PS. Ecogov (Economic Governance): First PC of RQ & GE. Instgov (Institutional Governance): First PC of
RL & CC.
It is important to note that some concerns have been raised on the quality of variables
that are derived from primary regressions. As recently documented by Asongu and
Nwachukwu (2016a), the issues are related to the consistency and efficiency of estimated
coefficients as well as to the validity of inferences based on the estimated coefficients.
According to Pagan (1984, p. 242), whereas two-step estimators are consistent and efficient,
only few references that are valid can be drawn. The concern is broadly consistent with the
bulk of literature on the subject (Oxley & McAleer, 1993; McKenzie & McAleer, 1997; Ba
& Ng, 2006; Westerlund & Urbain, 2013a).
Within the framework of PC-augmented variables used in this study, Westerlund and
Urbain (2012, 2013b) have built on previous studies (Pesaran, 2006; Stock & Watson, 2002;
Bai, 2003; Bai, 2009; Greenaway-McGrevy et al., 2012) to conclude that normal inferences
can be made from PC-augmented regressions so long as estimated coefficients converge to
their true values at the rate NT , (where T is the number of time series and N denotes the
number of cross-sections). They have gone further to emphasise that for such convergence to
take place; N and T should be sufficiently large. Unfortunately, to the best of our knowledge,
there is no specificity of how ‘large is sufficiently large’. In the light of this factor, two
concerns are relevant to this inquiry. On the one hand, it is not likely to further stretch N
because 51 countries in Africa are engaged. On the other hand, it also not very likely to
extend T because of three main reasons: (i) it is at the risk of compromising the validity of
specifications since it will result in instrument proliferation that will bias estimated results; (ii)
the starting year of the sample of 1996 cannot be extended downward because governance
indicators from the World Bank are only available from 1996 and (iii) the periodicity ends in
2011 due to data availability constraints. Within the framework of empirical literature, valid
inferences have been derived from PC-augmented empirics that have used far lower N and T,
namely: countries in the MENA (Middle East & North Africa) on the one hand (Asongu &
Nwachukwu, 2016a) and on the other hand countries of the BRICS (Brazil, Russia, India,
China & South Africa) and MINT (Mexico, Indonesia, Nigeria & Turkey) countries (Asongu,
2016a).

10
3.2.2 Generalised Method of Moments

There are six fundamental justifications for the adoption of the GMM empirical strategy.
Whereas the first-two consists of requirements for adopting the strategy, the last-four are
advantages that are associated with the strategy. First, the procedure of estimation is a
plausible fit because governance is persistent. In essence, the correlation between the
governance variables and their corresponding first lagged values is higher than the rule of
thumb threshold of 0.800 for persistence in a dependent variable. Second, the number of years
per country (T) is lower than the number of countries (N). Therefore, the T(16)<N(51)
condition for GMM application is also satisfied. Third, the estimation technique enables the
control for endogeneity in all regressors. Fourth, cross-country differences are not eliminated
with the technique. Fifth, biases from small samples are accounted for by the system
estimator. Sixth, it is principally for this fifth reason that Bond et al. (2001, pp. 3-4) have
recommended that the system GMM estimator (Arellano & Bover, 1995; Blundell & Bond,
1998) is a better fit compared to the difference estimator from Arellano and Bond (1991).
In this study, we adopt the Roodman (2009ab) extension of Arellano and Bover (1995)
that employs forward orthogonal deviations in place of first differences. The approach has
been established to: (i) limit the proliferation of instruments and (ii) control for cross-country
dependence (see Baltagi, 2008; Love & Zicchino, 2006). A two-step procedure is adopted
because it accounts for heteroscedasticity because the one-step procedure is homoscedasticity-
consistent.
The following equations in levels (1) and first difference (2) summarize the standard
system GMM estimation procedure.
4
Govi ,t   0   1Govi ,t    2Globi ,t    hWh ,i ,t   i  t   i ,t (1)
h 1

Govi ,t  Govi ,t    0   1 (Govi ,t   Govi ,t 2 )   2 (Globi ,t  Globi ,t  )

4 (2)
   h (Wh,i ,t   Wh,i ,t 2 )  (t  t  )   i ,t 
h1

Where: Gov i ,t is governance (political, economic, institutional and general) of country i at

period t ;  is a constant;  represents tau; Glob , denotes globalisation which may be

economic, political, social or general; W is the vector of control variables (GDP growth,
foreign aid, public investment and inflation),  i is the country-specific effect,  t is the time-

specific constant and  i,t the error term.

11
3.2.3 Identification and exclusion restriction
Following recent literature, all the independent variables are treated as predetermined
or suspected endogenous variables (Love & Zicchino, 2006; Dewan & Ramaprasad, 2014;
Asongu & De Moor, 2016). Therefore the gmmstyle is employed for them. Hence, only years
are considered as exogenous and the procedure for treating the ivstyle (years) is ‘iv(years,
eq(diff))’ because it is not feasible for years be endogenous in first-difference (see Roodman,
2009b).
To tackle to issue of simultaneity, lagged regressors are used as instruments for
forward-differenced indicators. Helmet transformations are also performed for the regressors
in order to remove fixed effects that are likely to influence the examined relationships
(Arellano & Bover, 1995; Love & Zicchino, 2006). These transformations consist of forward
mean-differencing of the variables: as opposed to the process of deducting previous
observations from present observations (see Roodman, 2009b, p. 104), the mean of all future
observations is subtracted from the variables. Such transformation enables parallel or
orthogonal conditions between forward-differenced variables and lagged values. Regardless
of the number of lags, data loss is minimised by loss, with the exception of the last
observation in cross sections, the underlying transformation are computable for all
observations “And because lagged observations do not enter the formula, they are valid as
instruments” (Roodman (2009b, p. 104).
In the study, it is further argued that ‘years’ which are considered as strictly
exogenous influence governance exclusively via the endogenous explaining variables. As
shown by Asongu and De Moor (2016), the statistical validity of this his exclusion restriction
is examined with the Difference in Hansen Test (DHT) for the exogeneity of instruments.
Accordingly, the null hypothesis of the DHT is the position that the ‘years’ (or instruments)
are strictly exogenous. Hence, the alternative hypothesis should be rejected for the
instruments to explain governance exclusively via the endogenous explaining variables. It is
important to note that, in the standard instrumental variable (IV) technique, the validity of
instruments is confirmed by the failure to reject the null hypothesis of the Sargan Over-
identifying Restrictions (OIR) test, which is an indication that the instruments do not explain
the governance beyond engaged channels of explaining variables.
Whereas this information criterion is used when the IV strategy is employed in the
literature (see Beck et al., 2003; Asongu & Nwachukwu, 2016b), the DHT in the GMM
strategy is employed to investigate if years exhibit strict exogeneity, by not explaining the
12
outcome variable beyond the proposed endogenous explaining variables or channels.
Therefore, in the section that follows the findings reported would confirm the validity of the
exclusion restriction if the null hypotheses of DHT corresponding to IV (year, eq(diff)) are
not rejected.

4. Empirical results and discussion of results

4.1 Presentation of results
Table 2, Table 3, Table 4 and Table 5 respectively present findings for political
governance, economic governance, institutional governance and general governance. Table 2,
Table 3, Table 4 and Table 5 also respectively investigate Hypothesis 1, Hypothesis 2,
Hypothesis 3 and Hypothesis 4. There are four specifications corresponding to each
globalisation dynamic for each governance dimension. Consistent with recent literature on
the application of the GMM with forward orthogonal deviations, four information criteria are
used to investigate the validity of estimated models3.
The following findings can be established for Table 2 on the linkages between
political governance and globalisation. (i) Only social globalisation significantly improves
political stability. (ii) Only economic globalisation does not significantly increase voice &
accountability and political governance. (iii) The significant control variables have expected
signs for the most part.
The following findings can be established for Table 3 on the linkages between
economic governance and globalisation. (i) Only economic globalisation significantly
improves regulation quality. (ii) Social globalisation and general globalisation significantly
increase government effectiveness. (iii) Economic globalisation and general globalisation
significantly improve economic governance.
The following findings can be established for Table 4 on the linkages between
institutional governance and globalisation. While only social globalisation improves
corruption-control, the effects of globalisation dynamics on the rule of law and institutional

3
“Four main information criteria are used to assess the validity of the estimated models. First, the null
hypothesis of the second-order Arellano and Bond autocorrelation test (AR(2)) in difference for the absence of
autocorrelation in the residuals should not be rejected. Second the Sargan and Hansen OIR tests should not be
significant because their null hypotheses are the positions that instruments are valid or not correlated with the
error terms. In essence, whereas the Sargan OIR test is not robust but not weakened by instruments, the Hansen
OIR is robust but weakened by instruments. In order to restrict identification or limit the proliferation of
instruments, we have ensured that instruments are lower than the number of cross-sections in most
specifications. Third, the DHT for exogeneity of instruments is also employed to assess the validity of results
from the Hansen OIR test. Fourth, a Fischer test for the joint validity of estimated coefficients is also provided”
(Asongu & De Moor, 2016, p. 21).
13
 governance are not significant. In Table 5 on the linkages between general governance and
globalisation, the effects of social globalisation and general globalisation are significantly
positive.

Table 2: Political Governance and Globalisation (for Hypothesis 1)

Dependent Variable: Political Governance
Political Stability (PS) Voice & Accountability (VA) Political Governance (Polgov)
Polglob Ecoglob Socioglob Glob Polglob Ecoglob Socioglob Glob Polglob Ecoglob Socioglob Glob
Constant -0.280 -0.036 -0.438*** -0.577 -0.102 -0.044 -0.298*** -0.550*** -0.206* 0.052 -0.559*** -0.581***
(0.162) (0.834) (0.002) (0.136) (0.172) (0.709) (0.001) (0.000) (0.090) (0.778) (0.002) (0.007)
PS (-1) 0.817*** 0.964*** 0.752*** --- --- --- --- --- --- --- --- ---
(0.000) (0.000) (0.000)
VA (-1) --- --- --- --- 1.019*** 0.841*** 0.992*** 1.004*** --- --- --- ---
(0.000) (0.000) (0.000) (0.000)
Polgov(-1) --- --- --- --- --- --- --- --- 0.958*** 0.893*** 0.881*** 0.919***
(0.000) (0.000) (0.000) (0.000)
Political Glob. 0.003 --- --- --- 0.002** --- --- --- 0.004*** --- --- ---
(0.195) (0.028) (0.004)
Economic Glob. --- -0.001 --- --- --- -0.0002 --- --- --- -0.001 --- ---
(0.600) (0.908) (0.632)
Social Glob. --- --- 0.008** --- --- --- 0.007*** --- --- --- 0.016*** ---
(0.016) (0.003) (0.001)
Globalisation(Glo --- --- --- 0.008 --- --- --- 0.012*** --- --- --- 0.015***
b)
(0.243) (0.000) (0.001)
GDP growth 0.006*** 0.010*** 0.007*** 0.007*** 0.002* 0.002 0.003** 0.003* 0.006*** 0.011*** 0.008*** 0.004**
(0.001) (0.000) (0.000) (0.000) (0.090) (0.101) (0.017) (0.055) (0.005) (0.000) (0.001) (0.048)
Foreign aid -0.001** 0.0003 -0.0006 -0.001** 0.0008* 0.001** 0.002*** 0.001** 0.0005 0.001 0.003*** -0.000
(0.035) (0.706) (0.481) (0.036) (0.061) (0.013) (0.001) (0.023) (0.935) (0.285) (0.003) (0.996)
Public Invt. 0.007 0.002 0.0006 0.006 0.001 -0.006** -0.0007 0.005*** 0.003 -0.002 -0.001 0.007**
(0.136) (0.704) (0.905) (0.254) (0.581) (0.035) (0.663) (0.007) (0.196) (0.648) (0.754) (0.041)
Inflation -0.000*** -0.000** -0.000*** -0.000*** 0.000 -0.000*** -0.000 0.000* -0.000*** -0.000*** -0.000*** -0.000***
(0.000) (0.014) (0.000) (0.000) (0.141) (0.000) (0.656) (0.096) (0.003) (0.007) (0.000) (0.006)

AR(1) (0.000) (0.001) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.001) (0.000) (0.000)
AR(2) (0.640) (0.525) (0.548) (0.650) (0.545) (0.443) (0.720) (0.319) (0.666) (0.868) (0.524) (0.824)
Sargan OIR (0.285) (0.193) (0.677) (0.400) (0.242) (0.076) (0.716) (0.385) (0.149) (0.040) (0.473) (0.160)
Hansen OIR (0.238) (0.336) (0.497) (0.427) (0.312) (0.263) (0.595) (0.504) (0.085) (0.231) (0.267) (0.061)

DHT for
instruments
(a)Instruments in
levels
H excluding group (0.792) (0.832) (0.666) (0.761) (0.645) (0.510) (0.557) (0.575) (0.821) (0.704) (0.612) (0.727)
Dif(null, (0.101) (0.167) (0.352) (0.246) (0.190) (0.190) (0.522) (0.406) (0.024) (0.114) (0.163) (0.020)
H=exogenous)
(b) IV (years,
eq(diff))
H excluding group (0.793) (0.347) (0.570) (0.741) (0.060) (0.471) (0.341) (0.296) (0.516) (0.178) (0.245) (0.657)
Dif(null, (0.048) (0.386) (0.357) (0.168) (0.967) (0.163) (0.789) (0.712) (0.025) (0.114) (0.373) (0.009)
H=exogenous)

Fisher 219.82*** 178.46*** 206.83*** 219.25*** 3048.4*** 403.01*** 1424.7*** 881.53*** 1605.0*** 495.25*** 1314.9*** 2211.4***
Instruments 30 30 30 30 30 30 30 30 30 30 30 30
Countries 45 41 45 45 45 41 45 45 45 41 45 45
Observations 332 308 332 332 332 308 332 332 332 308 332 332

*,**,***: significance levels of 10%, 5% and 1% respectively. DHT: Difference in Hansen Test for Exogeneity of Instruments’ Subsets. Dif:
Difference. OIR: Over-identifying Restrictions Test. The significance of bold values is twofold. 1) The significance of estimated coefficients
and the Fisher statistics. 2) The failure to reject the null hypotheses of: a) no autocorrelation in the AR(1) and AR(2) tests and; b) the validity
of the instruments in the Sargan OIR test.

14
 Table 3: Economic Governance and Globalisation (for Hypothesis 2)
Economic Governance (Dependent Variable)
Regulation Quality (RQ) Government Effectiveness (GE) Economic Governance (Ecogov)
Polglob Ecoglob Socioglob Glob Polglob Ecoglob Socioglob Glob Polglob Ecoglob Socioglob Glob
Constant 0.037 -0.297 -0.132 -0.186* -0.124 -0.172* -0.301** -0.227** -0.067 -0.171* -0.061 -0.172
(0.648) (0.001) (0.159) (0.096) (0.132) (0.085) (0.013) (0.040) (0.315) (0.090) (0.674) (0.322)
RQ (-1) 0.844*** 0.848*** 0.866*** 0.815*** --- --- --- --- --- --- --- ---
(0.000) (0.000) (0.000) (0.000)
GE (-1) --- --- --- --- 0.874*** 0.841*** 0.881*** 0.901*** --- --- --- ---
(0.000) (0.000) (0.000) (0.000)
Ecogov(-1) --- --- --- --- --- --- --- --- 0.915*** 0.951*** 0.887*** 0.947***
(0.000) (0.000) (0.000) (0.000)
Political Glob. -0.001 --- --- --- 0.001 --- --- --- 0.001 --- --- ---
(0.138) (0.375) (0.240)
Economic Glob. --- 0.004** --- --- --- 0.001 --- --- --- 0.003** --- ---
(0.028) (0.383) (0.044)
Social Glob. --- --- 0.0007 --- --- --- 0.006** ---- --- --- 0.003 ---
(0.765) (0.024) (0.375)
Globalisation(Glob) --- --- --- 0.001 --- --- --- 0.005* --- --- --- 0.947***
(0.470) (0.062) (0.000)
Control variables Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
AR(1) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
AR(2) (0.167) (0.169) (0.142) (0.151) (0.139) (0.148) (0.125) (0.131) (0.131) (0.128) (0.134) (0.111)
Sargan OIR (0.505) (0.035) (0.124) (0.503) (0.458) (0.215) (0.799) (0.416) (0.282) (0.060) (0.291) (0.164)
Hansen OIR (0.414) (0.203) (0.590) (0.522) (0.494) (0.625) (0.729) (0.619) (0.206) (0.164) (0.254) (0.240)

DHT for instruments

(a)Instruments in
levels
H excluding group (0.463) (0.223) (0.236) (0.434) (0.595) (0.594) (0.542) (0.606) (0.376) (0.635) (0.269) (0.407)
Dif(null, (0.368) (0.267) (0.773) (0.513) (0.384) (0.535) (0.699) (0.520) (0.182) (0.083) (0.301) (0.206)
H=exogenous)
(b) IV (years,
eq(diff))
H excluding group (0.980) (0.600) (0.476) (0.830) (0.413) (0.417) (0.413) (0.329) (0.938) (0.736) (0.271) (0.708)
Dif(null, (0.050) (0.071) (0.596) (0.189) (0.515) (0.706) (0.857) (0.802) (0.019) (0.032) (0.314) (0.066)
H=exogenous)

Fisher 3092.9*** 3999.0*** 4581.9*** 2266.1*** 678.07*** 892.87*** 746.56*** 479.02*** 1288.2*** 738.85*** 1097.2*** 1424.6***
Instruments 30 30 30 30 31 31 31 31 30 30 30 30
Countries 45 41 45 45 45 41 45 45 45 41 45 45
Observations 332 308 332 332 365 340 365 365 332 308 332 332

*,**,***: significance levels of 10%, 5% and 1% respectively. DHT: Difference in Hansen Test for Exogeneity of Instruments’ Subsets. Dif:
Difference. OIR: Over-identifying Restrictions Test. The significance of bold values is twofold. 1) The significance of estimated coefficients
and the Fisher statistics. 2) The failure to reject the null hypotheses of: a) no autocorrelation in the AR(1) and AR(2) tests and; b) the validity
of the instruments in the Sargan OIR test.

15
 Table 4: Institutional Governance and Globalisation (for Hypothesis 3)
Panel B: Institutional Governance (Dependent Variable)
Corruption-Control (CC) Rule of Law (RL) Institutional Governance (Instgov)
Polglob Ecoglob Socioglob Glob Polglob Ecoglob Socioglob Glob Polglob Ecoglob Socioglob Glob
Constant -0.269** -0.053 -0.300** -0.364 -0.153** -0.133 -0.105 -0.225 -0.239 0.016 -0.305 -0.332
(0.046) (0.676) (0.020) (0.115) (0.041) (0.255) (0.443) (0.121) (0.240) (0.942) (0.187) (0.256)
CC (-1) 0.832*** 0.797*** 0.877*** 0.805*** --- --- --- --- --- --- --- ---
(0.000) (0.000) (0.000) (0.000)
RL (-1) --- --- --- --- 0.948*** 0.867*** 0.001 0.961*** --- --- --- ---
(0.000) (0.000) (0.685) (0.000)
Instgov(-1) --- --- --- --- --- --- --- --- 0.927*** 0.895*** 0.907*** 0.918***
(0.000) (0.000) (0.000) (0.000)
Political Glob. 0.002 --- --- --- 0.001 --- --- --- 0.003 --- --- ---
(0.182) (0.110) (0.269)
Economic Glob. --- -0.002 --- --- --- 0.0009 --- --- --- 0.0004 --- ---
(0.318) (0.663) (0.928)
Social Glob. --- --- 0.007** --- --- --- 0.001 --- --- --- 0.007 ---
(0.028) (0.685) (0.303)
Globalisation(Glob) --- --- --- 0.005 --- --- --- 0.003 --- --- --- 0.007
(0.244) (0.246) (0.262)
Control Variables Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
AR(1) (0.000) (0.000) (0.000) (0.000) (0.000) (0.001) (0.000) (0.000) (0.000) (0.001) (0.000) (0.000)
AR(2) (0.500) (0.644) (0.596) (0.523) (0.434) (0.430) (0.402) (0.443) (0.281) (0.330) (0.293) (0.279)
Sargan OIR (0.771) (0.791) (0.356) (0.814) (0.029) (0.008) (0.093) (0.014) (0.277) (0.205) (0.178) (0.246)
Hansen OIR (0.181) (0.465) (0.279) (0.414) (0.296) (0.135) (0.385) (0.280) (0.376) (0.498) (0.345) (0.256)

DHT for instruments

(a)Instruments in
levels
H excluding group (0.796) (0.865) (0.696) (0.897) (0.187) (0.063) (0.425) (0.136) (0.416) (0.491) (0.937) (0.582)
Dif(null, (0.069) (0.236) (0.150) (0.185) (0.444) (0.378) (0.358) (0.495) (0.356) (0.447) (0.128) (0.162)
H=exogenous)
(b) IV (years,
eq(diff))
H excluding group (0.248) (0.423) (0.134) (0.275) (0.112) (0.820) (0.270) (0.208) (0.277) (0.828) (0.412) (0.413)
Dif(null, (0.218) (0.463) (0.646) (0.591) (0.758) (0.017) (0.550) (0.462) (0.526) (0.172) (0.301) (0.190)
H=exogenous)

Fisher 534.05*** 443.80*** 890.26*** 711.43*** 3129.7*** 874.54*** 2559.8*** 1739.0*** 1462.4*** 469.22*** 1611.4*** 742.47***
Instruments 30 30 30 30 30 30 30 30 30 30 30 30
Countries 45 41 45 45 45 41 45 45 45 41 45 45
Observations 332 308 332 332 332 308 332 332 332 308 332 332

*,**,***: significance levels of 10%, 5% and 1% respectively. DHT: Difference in Hansen Test for Exogeneity of Instruments’ Subsets. Dif:
Difference. OIR: Over-identifying Restrictions Test. The significance of bold values is twofold. 1) The significance of estimated coefficients
and the Fisher statistics. 2) The failure to reject the null hypotheses of: a) no autocorrelation in the AR(1) and AR(2) tests and; b) the validity
of the instruments in the Sargan OIR test.

16
 Table 5: General Governance and Globalisation (for Hypothesis 4)
Dependent variable: General Governance (G.Gov)
Polglob Ecoglob Socioglob Glob
Constant -0.149 -0.007 -0.526* -0.464
(0.367) (0.977) (0.051) (0.122)
G.Gov (-1) 0.976*** 0.939*** 0.960*** 0.951***
(0.000) (0.000) (0.000) (0.000)
Political Glob. 0.002 --- --- ---
(0.249)
Economic Glob. --- 0.0004 --- ---
(0.936)
Social Glob. --- --- 0.015** ----
(0.041)
Globalisation(Glob) --- --- --- 0.009***
(0.000)
Control Variables Yes Yes Yes Yes
AR(1) (0.000) (0.000) (0.000) (0.000)
AR(2) (0.190) (0.312) (0.186) (0.208)
Sargan OIR (0.356) (0.072) (0.192) (0.295)
Hansen OIR (0.128) (0.268) (0.108) (0.051)

DHT for instruments

(a)Instruments in levels
H excluding group (0.604) (0.506) (0.490) (0.601)
Dif(null, H=exogenous) (0.063) (0.196) (0.065) (0.020)
(b) IV (years, eq(diff))
H excluding group (0.219) (0.248) (0.123) (0.367)
Dif(null, H=exogenous) (0.157) (0.370) (0.236) (0.022)
Fisher 6750.74*** 8584.29*** 9145.62*** 4087.33***
Instruments 30 30 30 30
Countries 45 41 45 45
Observations 332 308 332 332
*,**,***: significance levels of 10%, 5% and 1% respectively. DHT: Difference in Hansen Test for Exogeneity of Instruments’ Subsets. Dif:
Difference. OIR: Over-identifying Restrictions Test. The significance of bold values is twofold. 1) The significance of estimated coefficients
and the Fisher statistics. 2) The failure to reject the null hypotheses of: a) no autocorrelation in the AR(1) and AR(2) tests and; b) the validity
of the instruments in the Sargan OIR test.

4.2 Further discussion of results and policy implications

4.2.1 Retrospect to tested hypothesis, theoretical contributions and policy implications
We set out to test four hypotheses that are linked to each dimension of governance,
namely: political governance, economic governance, institutional governance and general
governance for Hypothesis 1, Hypothesis 2, Hypothesis 3 and Hypothesis 4 respectively.
From a broad perspective, with the exception of Hypothesis 3 that is only mildly confirmed,
all the tested hypotheses are validated. However, the incidences of globalisation on the
governance variables differ in terms of specificities of globalisation and governance. The
specificities of globalisation variables cannot be overly emphasised because they obtained
17
from Greher et al. (2008). Conversely, the theoretical contributions of this study are apparent
in the differences in effects between composite governance variables obtained by means by
principal component analysis and their constituents. The theoretical contribution builds on
conceptual clarifications. As discussed in the introduction, it is conceptually flawed to use
concepts of governance (political, economic, institutional, inter alia) without some statistical
validity. We have consistently noticed that when the globalisation dynamic significantly
affects a composite indicator of governance, the effect on constituent governance indicators is
not consistent. In the same vein, the positive effects on constituent indicators of a composite
governance variable may not be reflected in the composite governance variable. In the
paragraphs that follow, we engage specific findings by articulating three main peculiarities,
notably: (i) political governance is driven by voice and accountability compared to political
stability and (ii) economic governance is driven by both government effectiveness and
regulation quality from specific angles of globalisation (more insights into Hypothesis 2)
First, the fact that in the globalisation-‘political governance’ nexus, political
governance is driven fundamentally by ‘voice & accountability’ (compared to political
stability) can be explained on two counts. On the one hand, the Washington Consensus has
fundamentally articulated the concept of governance to reflect political governance and
democratic processes. Hence, it is not surprising that the criteria used to collect data for the
globalisation variables may be framed toward influencing more of ‘voice and accountability’
than of political stability/non violence. Hence, the theoretical constructs of globalisation and
democratic processes emphasising ‘voice & accountability’ overlap by design. In addition to
the six meanings of governance clearly discussed by the influential paper of Rhodes (1996),
the seventh meaning of governance we are discussing is what escaped Rhodes’ attention.
Simply put, governance was a ‘code word’ used to promote democracy. This is the reason
why indicators (such as voice and accountability) used by Kaufmann and his collaborators in
the various 'governance matters' publications have been for all practical purposes measures of
democracy (Kaufmann et al., 2010a, 2010b). The interested reader can also find more insights
from criticism by Kurtz and Schrank (2007a, 2007b). This narrative which consistent with
the definition of the Washington Consensus (WC) which is designed to prioritise political
governance, contrary the Beijing Model (BM) which prioritises economic governance: “…
defines the WC as liberal democracy, private capitalism, and priority in political rights, the
BM is defined as deemphasized democracy, state capitalism, and priority in economic rights”.
(Asongu, 2016b, p.354; Asongu & Ssozi, 2016).
18
 On the other hand and in the light of the clarifications, the more significant connection
between ‘voice and accountability’ and political governance can be explained by the fact that
countries espousing the BM could be considered as reflecting low levels of political
governance despite enjoying comparatively higher levels of political stability/non violence.
To put this point into greater perspective, not all dimensions of political governance as
measured by Kaufmann and co-authors directly reflect democratic quality. For instance, a
strong dictatorship may enjoy substantial political stability with little or no ‘voice and
accountability’, while liberal democracies may enjoy strong ‘voice and accountability’
simultaneously with substantial political instability.
Second, the fact that economic governance is driven both by government effectiveness
and regulation quality partly substantiates the narrative on political governance and the
priority of the Washington Consensus discussed in the preceding paragraph. In other words,
the globalisation process and measurement was not designed to prioritise one aspect of
economic governance over the other. It is important to note that political governance is the
election and replacement of political leaders while economic governance is the formulation
and implementation of policies that deliver public commodities. As we have established: (i)
the positive effect of economic globalisation on economic governance is driven by regulation
quality while and (ii) the positive impact of general globalisation on economic governance is
driven by government effectiveness.

5. Conclusion and further research directions

In this study, we have assessed the effect of globalisation on governance using in 51 African
countries for the period 1996-2011. Ten bundled and unbundled governance indicators are
used, namely: political governance (consisting of political stability/non violence and voice &
accountability), economic governance (encompassing regulation quality and government
effectiveness), institutional governance (entailing corruption-control and the rule of law) and
general governance (consisting of political, economic and institutional governances).
Political, economic, social and general globalisation variables are used and the empirical
evidence is based on Generalised Method of Moments.
The following findings have been established. First, on political governance, only
social globalisation improves political stability while only economic globalisation does not
increase voice & accountability and political governance. Second, with regard to economic

19
 governance: (i) only economic globalisation significantly promote regulation quality; (ii)
social globalisation and general globalisation significantly advance government effectiveness
and (iii) economic globalisation and general globalisation significantly promote economic
governance. Third, as concerns institutional governance, whereas only social globalisation
improves corruption-control, the effects of globalisation dynamics on the rule of law and
institutional governance are not significant. Fourth, the impacts of social globalisation and
general globalisation are positive on general governance.
It in the light of the above: (i) political governance is driven by voice and
accountability compared to political stability and (ii) economic governance is promoted by
both regulation quality and government effectiveness from specific globalisation angles.
Theoretical contributions and policy implications have been discussed.
Future research can improve extant literature by assessing if established linkages
withstand empirical scrutiny when the nexuses are investigated within the some fundamental
characteristics of Africa governance, namely: legal origins, income levels, landlockedness,
resource wealth, inter alia. Moreover, investigating the established linkages throughout the
conditional distributions of governance may provide more insights into the nexuses because
blanket globalisation-governance policies may not be effective unless they are contingent on
initial levels of governance and tailored differently across countries with low, intermediate
and high levels of governance.

Appendix

Appendix 1: Definitions of Variables

Variables Signs Definitions of variables (Measurement) Sources
“Political stability/no violence (estimate): measured as the
Political Stability PolSta perceptions of the likelihood that the government will be World Bank (WGI)
destabilized or overthrown by unconstitutional and violent
means, including domestic violence and terrorism”
Voice & V&A “Voice and accountability (estimate): measures the extent to
Accountability which a country’s citizens are able to participate in selecting World Bank (WGI)
their government and to enjoy freedom of expression,
freedom of association and a free media”.
Political Polgov First Principal Component of Political Stability and Voice & PCA
Governance Accountability. The process by which those in authority are
selected and replaced.
“Government effectiveness (estimate): measures the quality
Government Gov. E of public services, the quality and degree of independence World Bank (WGI)

20
Effectiveness from political pressures of the civil service, the quality of
policy formulation and implementation, and the credibility of
governments’ commitments to such policies”.
Regulation RQ “Regulation quality (estimate): measured as the ability of the
Quality government to formulate and implement sound policies and World Bank (WGI)
regulations that permit and promote private sector
development”.
Economic Ecogov “First Principal Component of Government Effectiveness and PCA
Governance Regulation Quality. The capacity of government to formulate
& implement policies, and to deliver services”.
“Rule of law (estimate): captures perceptions of the extent to
Rule of Law RL which agents have confidence in and abide by the rules of World Bank (WGI)
society and in particular the quality of contract enforcement,
property rights, the police, the courts, as well as the likelihood
of crime and violence”.
“Control of corruption (estimate): captures perceptions of the
Corruption- CC extent to which public power is exercised for private gain, World Bank (WGI)
Control including both petty and grand forms of corruption, as well as
‘capture’ of the state by elites and private interests”.
Institutional Instgov First Principal Component of Rule of Law and Corruption- PCA
Governance Control. The respect for citizens and the state of institutions
that govern the interactions among them
General G.gov First Principal Component of Political, Economic and PCA
Governance Institutional Governances
Political Polglob “This captures the extent of political globalisation in terms of
Globalisation number of foreign embassies in a country, membership in Dreher et al. (2010)
internatonal orgnisations, participation in UN security”.
Economic Ecoglob “Overall economic globalisation (considers both the flow and Dreher et al. (2010)
Globalisation the restrictions in a given country to derive this). The higher,
the better social globalisation”.
Social Socglob “Overall scores for the countries extent of social Dreher et al. (2010)
Globalisation globalisation. The higher the better socially globalised the
country”.
Globalisation Glob This is an overall index that contains economic globalisation, Dreher et al. (2010)
social globalisation and political globalisation
Education Educ Secondary School Enrolment (% of Gross) World Bank (WDI)
Mobile phones Mobile Mobile phone subscriptions (per 100 people) World Bank (WDI)
GDP growth GDPg Gross Domestic Product (GDP) growth (annual %) World Bank (WDI)
Population Popg Population growth rate (annual %) World Bank (WDI)
growth
Foreign aid Aid Total Development Assistance (% of GDP) World Bank (WDI)
Public Investment Pub. Ivt. Gross Public Investment (% of Grosss) World Bank (WDI)
Inflation Inflation Annual Consumer Price Inflation World Bank (WDI)
WDI: World Bank Development Indicators. WGI: World Governance Indicators. PCA: Principal Component
Analysis.

21
Appendix 2: Summary statistics (1996-2011)
Mean SD Minimum Maximum Observations
Political Stability -0.572 0.954 -3.304 1.189 612
Voice & Accountability -0.709 0.730 -2.178 1.009 612
Political Governance 0.000 1.273 -3.323 2.790 612
Government Effectiveness -0.731 0.639 -2.454 0.876 662
Regulation Quality -0.708 0.654 -2.663 0.846 612
Economic Governance -0.0009 1.048 -2.252 2.458 611
Rule of Law -0.708 0.683 1.048 -2.525 612
Control of Corruption -0.600 0.601 -2.061 1.255 611
Institutional Governance -0.002 1.368 -3.584 3.596 611
General Governance -0.004 1.985 -5.535 4.819 611
Political Globalisation 58.142 18.323 19.958 94.164 816
Economic Globalisation 44.625 13.095 12.301 84.949 688
Social Globalisation 28.519 11.247 5.773 65.033 816
Globalisation 41.376 10.133 17.514 68.523 816
Education(SSE) 40.941 26.892 4.022 123.893 491
Mobile phone penetration 19.829 29.390 0.000 171.515 811
GDP growth 4.863 7.297 -32.832 106.279 792
Population growth 2.317 1.007 -1.081 9.770 816
Foreign aid 10.212 12.245 -0.251 147.054 791
Public Investment 7.491 4.692 0.000 43.011 713
Inflation 54.723 925.774 -9.797 24411.03 717
S.D: Standard Deviation.

22
 Appendix 3: Correlation matrix for GMM (uniform sample size : 329)
Political Governance Economic Governance Institutional Governance Globalisation Control Variables
PS VA Polgov GE RQ Ecogov CC RL Instgov G.gov Polglob Ecoglob Socglob Glob SSE Mobile GDPg Popg Aid Pub.Ivt. Inflation
1.000 0.690 0.911 0.678 0.712 0.460 0.736 0.792 0.785 0.865 -0.129 0.363 0.561 0.393 0.402 0.245 -0.078 -0.342 -0.143 0.136 -0.189 PS
1.000 0.921 0.690 0.735 0.425 0.697 0.762 0.752 0.857 0.015 0.373 0.477 0.430 0.411 0.206 -0.060 -0.211 -0.078 0.141 -0.100 VA
1.000 0.740 0.787 0.482 0.774 0.843 0.833 0.936 -0.046 0.381 0.555 0.442 0.431 0.246 -0.073 -0.291 -0.108 0.147 -0.154 Polgov
1.000 0.876 0.647 0.865 0.887 0.905 0.889 0.132 0.422 0.720 0.631 0.661 0.368 -0.038 -0.475 -0.295 0.054 -0.127 GE
1.000 0.736 0.814 0.858 0.862 0.912 0.138 0.428 0.727 0.640 0.605 0.387 -0.091 -0.386 -0.342 -0.380 -0.220 RQ
1.000 0.552 0.611 0.597 0.635 0.199 0.304 0.591 0.541 0.407 0.307 -0.084 -0.325 -0.262 -0.274 -0.222 Ecogov
1.000 0.877 0.971 0.917 -0.080 0.411 0.679 0.499 0.596 0.311 -0.096 -0.513 -0.213 0.217 -0.147 CC
1.000 0.965 0.953 0.045 0.409 0.741 0.590 0.625 0.354 -0.058 -0.471 -0.250 0.123 -0.170 RL
1.000 0.964 -0.020 0.419 0.728 0.557 0.629 0.341 -0.077 -0506 -0.240 0.125 -0.163 Instgov
1.000 0.005 0.431 0.705 0.565 0.581 0.333 -0.083 -0.427 -0.219 0.098 -0.184 G.gov
1.000 -0.117 0.099 0.486 0.192 0.245 -0.014 0.057 -0.232 -0.108 -0.099 Polglob
1.000 0.525 0.715 0.585 0.509 0.048 -0.476 -0.419 0.012 0.198 Ecoglob
1.000 0.802 0.792 0.551 -0.168 -0.734 -0.512 -0.141 -0.156 Socglob
1.000 0.780 0.652 -0.062 -0.570 -0.580 -0.115 -0.021 Glob
1.000 0.602 -0.120 -0.693 -0.580 -0.046 -0.092 SSE
1.000 -0.090 -0.421 -0.348 -0.020 -0.083 Mobile
1.000 0.195 0.073 0.216 0.023 GDPg
1.000 0.476 0.063 0.079 Popg
1.000 0.288 0.099 Aid
1.000 0.018 Pub. Ivt.
1.000 Inflation
PS: Political Stability/Non violence. VA: Voice & Accountability. Polgov: Political Governance. GE: Government Effectiveness. RQ: Regulation Quality. Ecogov: Economic Governance. CC: Corruption-Control. RL:
Rule of Law. Instgov: Institutional Governance. G.Gov: General Governance. Polgov: Political Globalisation. Ecoglob: Economic Globalisation. Socglob: Social Globalisation. Glob: Globalisation. SSE: Secondary
School Enrolment. Mobile: Mobile Phone Penetration. GDPg: Gross Domestic Product growth. Popg: Population growth. Aid: Foreign aid. Pub. Ivt: Public Investment.

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Appendix 4: Persistence of the dependent variables
Political Governance Economic Governance Institutional Governance
PS VA Polgov GE RQ Ecogov CC RL Instgov G.gov
PS(-1) 0.961
VA(-1) 0.981
Polgov(-1) 0.978
GE(-1) 0.980
RQ(-1) 0.978
Ecogov(-1) 0.990
CC(-1) 0.967
RL(-1) 0.981
Instgov(-1) 0.981
G.gov(-1) 0.988

PS: Political Stability/Non violence. PS(-1): Lagged value of Political Stability/Non Violence. VA: Voice & Accountability. Polgov:
Political Governance. GE: Government Effectiveness. RQ: Regulation Quality. Ecogov: Economic Governance. CC: Corruption-Control.
RL: Rule of Law. Instgov: Institutional Governance. G.Gov: General Governance.

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