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Defining governance matters: A factor analytic assessment of governance institutions

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  • Givens, David

Abstract

This paper produces a new set of governance indices that enable estimation of the marginal economic benefits of particular categories of governance. The indices are constructed using a factor model, estimated on forty perceptions-based governance variables from eleven data sources. In contrast to previous research, a unified statistical framework is used to determine the number of governance indices to create, the conceptual content of each index, and the relative importance each has in accounting for the observable data. The four indices are labeled market infrastructure, downside governance risk, order, and civil liberties. Confidence intervals are calculated for each country, for each index to aid in the comparison of scores. As an application, the indices are used as explanatory variables in cross-country income regressions. Instrumental variables estimates show that market infrastructure and civil liberties both exert statistically and economically significant effects on per capita income, controlling for geography (malaria risk) and international trade.

Suggested Citation

  • Givens, David, 2013. "Defining governance matters: A factor analytic assessment of governance institutions," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1026-1053.
    • Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1026-1053
    DOI: 10.1016/j.jce.2012.09.005
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    2. Standaert, Samuel, 2015. "Divining the level of corruption: A Bayesian state-space approach," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 782-803.
    3. Mihuț Ioana-Sorina, 2015. "The Economic Governance: Concept, Instruments Of Measurment And Evolutions Across European Union Member States," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 237-246, July.
    4. Hendrix, Cullen & Noland, Marcus, 2015. "Myanmar: Cross-Cutting Governance Challenges," ADB Economics Working Paper Series 428, Asian Development Bank.
    5. Cullen S. Hendrix & Marcus Noland, 2014. "Managing Myanmar's Resource Boom to Lock in Reforms," Policy Briefs PB14-11, Peterson Institute for International Economics.
    6. Hichem Saidi, 2020. "Threshold effect of institutions on finance-growth nexus in MENA region: New evidence from panel simultaneous equation model," Economics Bulletin, AccessEcon, vol. 40(1), pages 699-715.
    7. Miao, Chao & Gast, Johanna & Laouiti, Rahma & Nakara, Walid, 2022. "Institutional factors, religiosity, and entrepreneurial activity: A quantitative examination across 85 countries," World Development, Elsevier, vol. 149(C).

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    More about this item

    Keywords

    Governance; Civil liberties; Property rights; Factor model;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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