Government Effectiveness and Economic Policy in the OECD: Convergence and Divergence (1996–2022)

Abstract

The OECD has long sought to promote the convergence of economic policies among its member states. Yet substantial differences persist in government effectiveness and in the outcomes of key economic policies, raising concerns about the ability of countries with weaker institutional capacities to narrow the gap with more advanced economies. Although the literature highlights the central role of institutional quality in shaping economic performance, less attention has been devoted to whether countries actually converge in government effectiveness, and to how this dimension influences broader patterns of economic convergence. This study examines sigma and beta convergence in government effectiveness and in five core economic policy variables — GDP per capita, inflation, unemployment, public debt, and government expenditure — across 38 OECD countries from 1996 to 2022, using data from the World Bank’s Worldwide Governance Indicators and World Development Indicators. The analysis acknowledges that convergence is not a unidimensional phenomenon: reductions in economic disparities may occur without full alignment of policy strategies, and convergence in macroeconomic outcomes does not necessarily imply convergence in the institutional frameworks that support them. Conversely, formal policy alignment does not guarantee comparable administrative capacities for effective implementation. The findings reveal sigma convergence in most economic variables but no evidence of beta convergence, indicating that countries starting from less favourable positions have not systematically caught up with better-performing peers. In contrast, government effectiveness diverges over time, reflecting increasing institutional heterogeneity within the OECD. Overall, the results suggest that while economic disparities have narrowed in some areas, this trend has not been accompanied by a parallel convergence in institutional capacity. Strengthening public administration, improving regulatory quality, and enhancing international coordination remain essential for fostering deeper structural convergence.