Journal articles
Year
2026
Abstract
This paper examines how changes in firm-level total factor productivity (TFP) depend on the quality of state governance. We find robust evidence that an improvement in the quality of state governance by one standard deviation raises the average firm’s TFP by between 9 and 19 percent. We also show that this effect works through improved productive efficiency rather than technological progress. Further decompositions reveal that the key relevant institutions are government effectiveness, rule of law, and democratic accountability. Moreover, the contribution of state governance to TFP dominates that of corporate governance.
ISSAR, A., LIM, J. et MOHAPATRA, S. (2026). The quality of state governance as a source of international differences in total factor productivity. Public Choice, In press.