Bo Rothstein and Jan Teorell “Quality of government” and its close cousins “good governance” and “state capacity” are relatively new concepts that have made a strong impact in research as well as in some of the highest policy circles since the mid-1990s. These three concepts have received most attention in circles dealing with developing countries and the so-called “transition countries” (Smith 2007). In particular, “good governance” is now used by many national development agencies and international organizations such as the World Bank and the United Nations. An example is the International Monetary Fund, which in 1996 declared that “promoting good governance in all its aspects, including by ensuring the rule of law, improving the efficiency and accountability of the public sector, and tackling corruption, are essential elements of a framework within which economies can prosper” (IMF 2005). However, the economic and financial crises that started in October 2008 have shown that issues about “bad governance” cannot be seen only as problems for developing and transition countries but also for the highly developed parts of the world (Rothstein 2011). A case in point is that several well-placed analysts have argued that the background to the financial and economic crisis can be found in how powerful investment banks on Wall Street used their influence to relax regulatory oversight and capital requirements (Kaufmann 2004; Johnson 2009; Johnson and Kwak 2010). It should be added that available measures of quality of government and good governance show that several EU countries (notably Greece, Italy and...
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