Wednesday, April 23, 2008

Economics and the Rule of Law

Mr Kaufmann and his colleague Aart Kraay worked out the “300% dividend”: in the long run, a country's income per head rises by roughly 300% if it improves its governance by one standard deviation. One standard deviation is roughly the gap between India's and Chile's rule-of-law scores, measured by the bank. As it happens, Chile is about 300% richer than India in purchasing-power terms. The same holds for South Africa and Spain, Morocco and Portugal, Botswana and Ireland. Economists have repeatedly found that the better the rule of law, the richer the nation.
If you are interested in how various countries rank, check out the World Bank's Worldwide Governance Indicators.

via The Economist

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