In the international arena there is considerable consensus around the notion that democratic institutions and economic development are pivotal in reducing and preventing conflict. According to the United Nations, democracy is a core value and a universally recognized ideal. At the same time, in regards to economic development international organizations such as the World Bank have long been advocates of economic growth for reducing conflict and increasing prosperity. However, although developed countries with stable democratic governments tend to be more peaceful, history shows that conflict can become protracted in rich, poor, democratic, and non-democratic countries alike.

To shed light on the mechanisms through which democratic institutions prevent conflict, researchers have begun to focus more carefully on the components of democracy and economic factors such as income and growth. Although preliminary, recent research on governance suggests that informal institutions that ensure the effective implementation of policies are more important than the formal presence of a democracy or high levels economic development in reducing conflict.

Focusing on conflicts in independent countries around the world from 1960 through 2008, researchers created a good governance index that measured the extent to which policies benefited the population at large through informal mechanisms, formal democratic institutions, and economic policies and growth. Unlike studies that only take into account the political regime of the country or rate of economic growth, the index covered both formal political institutions (whether countries were democratic or not) as well as six informal institutions found to be key in the successful implementation of public policies: bureaucratic quality, rule of law, corruption, economic policies, military involvement in politics, and political exclusion and repression. Taking into account levels of good governance, researchers found that not only does risk of conflict after episodes of instability in countries with good governance drop much faster than in countries with poor governance, but that strong institutions have a more positive effect than economic growth in reducing conflict risk. Moreover, researchers found that although informal institutions had a slightly stronger impact, any reform that improves governance formally or informally has the potential of reducing conflict.

According to these results, investing in improving informal governance mechanisms can be an effective response to more immediately reduce levels of conflict. However, researchers point out that in the longer run it is important that economic growth and the consolidation of democratic institutions reinforce the positive effects of informal governance for peace to last.