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Natural Openness and Good Government

The author offers a possibly new interpretation of the connection between openness and good governance, with a conceptual model and some empirical evidence. Assuming that corruption and bad governance reduce international trade and investment more...

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Bibliographic Details
Main Author: Wei, Shang-Jin
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
AVERAGE INCOME
BAD GOVERNANCE
BENCHMARK
BILATERAL TRADE
BRIBERY
BUREAUCRACY
BUREAUCRAT
BUREAUCRATIC CORRUPTION
BUREAUCRATIC STRUCTURE
CIVIL RIGHTS
CIVIL SERVANTS
CIVIL SERVICE
COMPETITIVENESS
CONSUMPTION EXPENDITURES
CONTRACT ENFORCEMENT
CONVENTIONAL WISDOM
CORRUPTION
DEMOCRACY
DEMOCRATIC INSTITUTIONS
DEVELOPMENT ECONOMICS
DIRECT INVESTMENT
ECONOMIC DEVELOPMENT
ECONOMIC PERFORMANCE
ECONOMIC RISK
ECONOMICS LITERATURE
EFFECT OF TRADE
ELASTICITY
EMPIRICAL EVIDENCE
EQUILIBRIUM
EXPECTED UTILITY
EXPENDITURE
EXPORTS
FEDERAL STATES
FEDERALISM
FIGHTING CORRUPTION
FISCAL
FISCAL DECENTRALIZATION
FOREIGN DIRECT INVESTMENT
FOREIGN INVESTORS
FOREIGN TRADE
GDP
GDP PER CAPITA
GINI COEFFICIENT
GOOD GOVERNANCE
GOOD GOVERNMENT
GOVERNMENT OFFICIALS
GOVERNMENT PERFORMANCE
GOVERNMENT POLICIES
GOVERNMENT REVENUES
GROWTH RATE
IMPORTS
INCOME DISTRIBUTION
INCOME EFFECT
INCOME INEQUALITY
INCOME LEVEL
INEQUALITY
INSTITUTION BUILDING
INTERNATIONAL LABOR
INTERNATIONAL TRADE
LESS DEVELOPED COUNTRIES
LOCAL GOVERNMENT
LOCAL GOVERNMENTS
LORENZ CURVE
MARGINAL BENEFITS
MARGINAL COST
NATIONS
OPEN ECONOMIES
OPENNESS
OPPORTUNITY COST
OPTIMIZATION
PER CAPITA INCOME
POLITICAL ECONOMY
POLITICAL RIGHTS
POLITICAL RISK
PUBLIC GOVERNANCE
PUBLIC INSTITUTION
PUBLIC INSTITUTIONS
PUBLIC POLICY
PUBLIC SECTOR
REVERSE CAUSALITY
SOCIAL WELFARE
TAX RATE
TRADE BARRIERS
TRADE POLICIES
TRADING BLOCS
TRANSPARENCY
UTILITY FUNCTION
VOTING
WAGES
Online Access:http://documents.worldbank.org/curated/en/2000/08/443565/natural-openness-good-government
http://hdl.handle.net/10986/19796
Description
Summary:The author offers a possibly new interpretation of the connection between openness and good governance, with a conceptual model and some empirical evidence. Assuming that corruption and bad governance reduce international trade and investment more than domestic trade and investment, a "naturally more open economy"-as determined by its size and geography-would devote more resources to building good institutions and would display less corruption in equilibrium. How is "natural openness" defined? By size, geography, and language. France would be more naturally open than Argentina because Argentina is more remote. Ability to speak English facilitates international trade. A country with a long coast tends to be more open than a landlocked country. In the data, "naturally more open economies" do show less corruption even after their level of development is taken into account. "Residual openness"-which could include trade policies-is not important once "natural openness" is accounted for. Moreover, "naturally more open economies" also tend to pay civil servants salaries that are more competitive with those of their private sector counterparts. One implication of this research is that globalization may affect governance: as globalization deepens, the "natural openness" of all countries increases. This raises the opportunity cost of tolerating a given level of corruption and could provide new impetus for countries to fight corruption. These patterns are consistent with the conceptual model.

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