Political Accountability and Determinants of Governance under Principal-Agent Theor

This study examines the theory that quality of governance is largely dependent upon political accountability, and that the effect of political accountability on governance varies based on three main determinants: level of democracy, level of information available to the public, and diversification of the economy (Adsera et al. 2003). With quality of governance, represented by the World Bank's World Governance Indicators (WGI), as the dependent variable, this study considers how these three independent variables, and several control variables, affect governance quality. Incorporating data from 2010--2015 for 143 countries in both cross-sectional OLS and fixed effects panel regression analysis, this study finds that level of democracy has a direct relationship with voice and accountability and regularity quality, and an inverse relationship with governance effectiveness and rule of law. Information available to the public has a direct relationship with governance effectiveness, while diversification of the economy has a direct relationship with governance effectiveness and regularity quality, and an inverse relationship with rule of law and control of corruption.;This research also demonstrates that several other factors affect governance quality. Level of economic development, openness to trade, level of education, size of population, freedom of the press, cell phone penetration rate, and state fragility all play a role in determining at least some aspects of governance quality. While these variables are all shown to have a significant relationship with governance, they are still only part of the equation. Future research should endeavor to enhance the current findings and strive to identify the other factors that may contribute to governance quality.