Polity qualities: how governance affects poverty

For a large sample of 61 developing countries, over the period 1980-95, we calculate a measure of the efficiency with which national political-economic systems convert a given volume of material resources (GNP per capita) into human development (longevity, education and literacy) for their citizens. This we label this RICE (relative income conversion efficiency). Four main variabls explain variations in RICE. The first, population density, that works largely in technical fashion. It is easier and cheaper to provide health and education services to densely-clustered populations. The second variable is geographical: all else being equal, location in West Africa lowers the rate at which material resources are converted into human development. This probably reflects West Africa's highly disease-prone natural environment. The third and fourth variables relate to governance. They however correlate with RICE in strikingly contrasting ways. A composite measure of the quality of government institutions, produced for international investors and leaders, turnns out to be significantly but negatively correlated with RICE. In other words, countries with governance institutions that are attractive to international investors tend to perform badly at converting material resources into human development. By contrast, a variable relating to state-society relations – the extent to which governing elites are financially independent on their own citizens – is significantly and negatively correlated with RICE. Governments that are dependent on their own citizens for critical resources appear neither to strengthen this particular accountability mechanism nor to play an independent rold in raising RICE scores: we could find no statistical connection between RICE and the degree of democracy.