The paper assesses the state of governance in thirteen Caribbean Small States (CSS) by comparing these states among themselves, utilising global indicators relating to political governance, economic growth and GDP per capita. The main finding is that the governance scores and the GDP per capita in these states differ considerably, but there is a positive correlation between the two variables. On the other hand, the governance scores in the CSS tend to be negatively correlated with economic growth. These correlation patterns are similar globally. The paper delves deeper into the correlation between governance and economic growth and postulates that economic growth is related to improvements in governance and not the level of governance, arguing that a given governance improvement effort is likely to have a higher effect in a country with a lower level of governance. This assumption is termed "diminishing marginal governance effect". The test of this assumption indicates that economic growth does indeed relates to improvements in governance, keeping the stage of development constant. ; peer-reviewed
Purpose The purpose of this paper is to examine whether good governance across countries, utilising the Rule of Law indicator of the Worldwide Governance Indicators, is associated with economic growth, measured in terms of real GDP. It is to be noted that in this paper both variables are measured in terms of changes, comparing like with like. It is hypothesised that a country with a high level of economic development and a high level of good governance (typically an economically advanced country) tends to find it more difficult to improve these two variables, when compared to a country with lower levels GDP per capita and good governance (typically an economically backward country). This assumption is termed the "diminishing marginal governance effect".
Design/methodology/approach The paper tests the hypothesis that governance improvements are related to real GDP growth, using the panel data regression approach. In this way both variables are measured in terms of changes, comparing like with like. Relevant control variables are utilised to impose the ceteris paribus condition.
Findings The paper finds that improvements in good governance are statistically and significantly related to economic growth. This confirms the hypothesised "diminishing marginal governance effect" explained above.
Research limitations/implications The main research limitation of this paper is that measuring changes in the "Rule of Law" indicator over time may be subject to errors given that the "Rule of Law" score of each year is an average value with related standard deviations, and the latter vary from one year to another and from one country to another.
Practical implications The major practical implication of this paper is that good governance matters for economic growth and that in order to produce evidence for this the governance score must be measured in terms of changes and not in terms of levels. Another implication is that equations that compare economic growth with levels of governance are misspecified as they would not be comparing like with like.
Social implications There are various beneficial social implications associated with good governance which is considered as a major pillar for orderly social relationships. Economic growth also has important social implications as it means, if properly distributed, improvements in material well-being of the population.
Originality/value The originality of this paper is that it measures governance in terms of changes and not of levels. Studies on the relationship between governance and economic growth that measure governance in terms of levels generally do not find a positive relationship between the two variables. In using changes in both governance and real GDP, this paper confirms the "diminishing marginal effect of governance", hypothesis.
The proportion of individuals in material deprivation has almost halved to 8.7% in 2018 when compared to the year the indicator started being collected, 2009. Yet, with a few exceptions, the number of individuals at-risk-of-poverty increased at a yearly rate to reach 16.8% by 2018. At first glance, such divergent trends might appear anomalous, and highlight that poverty dynamics and related indicators warrant a deeper assessment. There is no correct way to define poverty in a society: value judgements play an important role. A long-standing debate is whether poverty is absolute or relative. Some say that the poverty line should reflect the absolute poverty threshold i.e., the cost of purchasing a fixed basket of goods and services that allows people to meet their basic needs; the demarcation between the poor and the non-poor. Others contend that we should instead think of poverty as a relative threshold, i.e., relative to the country's living standard. Those who view poverty in relative terms would argue that the poorest members of society appear to have lagged behind the others; hence the term 'at-risk-of-poverty'. In the absence of an absolute poverty indicator, debates on poverty can easily reach an impasse, as a change in relative poverty may not necessarily reflect a change in absolute poverty. The simplest poverty indicator is obtained by calculating the proportion of the total number of people below the poverty line in society. However, relying on the over-simplification argument that an increase in relative poverty is bad would be analogous to saying that an increase in taxes is bad. Such judgments should be complemented by other analysis such as the rate of taxation, whether the individual is in unemployment or in a high-paying job, and the ultimate purpose of taxation to finance government expenditure. For this reason, even if there is agreement about the appropriate poverty line to use when measuring poverty, various indicators of poverty must be considered besides the headcount ratio. Indeed, the same society may have the exact year-on-year poverty incidence, but the total cost of alleviating all the poor up to the poverty line might be very different each year depending on changes in the poverty gap. Furthermore, the extent to which the incomes of the poor are concentrated in particular income ranges might also vary: many poor might be close to the poverty threshold, with only a few individuals being in extreme poverty, or vice-versa. Another aspect to consider in the poverty debate is the relative poverty threshold: today's living standard is unrecognisable from 2005. In view of a dearth of information on the topic, this study complements existing studies on poverty incidence with other measures relating to poverty intensity and inequality amongst the poor. We also dig deeper in relative poverty headcount rates to identify the factors contributing to such changes over the years. For this purpose, we study poverty dynamics in Malta between 2005 and 2018, with special attention to household characteristics. ; peer-reviewed
