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Measuring Governance Using Cross-Country Perceptions Data

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  • Kaufmann, Daniel
  • Kraay, Aart
  • Mastruzzi, Massimo

Abstract

This paper describes an ongoing project to measure governance using crosscountry perceptions data. The governance indicators measure six dimensions of governance and cover 209 countries and territories for 1996-2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 different organizations. We present the estimates of governance, and the margins of error capturing the range of likely values for each country. We show how these margins of error should be taken into account when considering cross-country differences and changes over time in governance. We find that in a number of countries the quality of governance improved significantly in the short term. Yet deteriorations also took place in some other countries, while in many there was little change. There has been no worldwide improvement in governance on average. We argue that perceptions-based data provide valuable insights relative to objective data on governance, and that individual objective measures of governance provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. We also show that margins of error are not unique to perceptions based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. We also empirically investigate the importance of ideological biases in expert assessments of corruption and find little evidence that they are present. Governance indicators and per capita incomes are highly correlated across countries. Recent research shows that this correlation captures an important causal effect running from measures of governance such as these to per capita incomes. Critics of this view argue that the correlation captures substantial reverse causation from incomes to governance, and is tainted by "halo effects" where rich countries receive good ratings simply because they are rich. We review available evidence on these two critiques and find it to be lacking.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8219.

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Date of creation: 2005
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Handle: RePEc:pra:mprapa:8219

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  1. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 17, pages 37-75, 03.
  2. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," NBER Working Papers 10568, National Bureau of Economic Research, Inc.
  3. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  4. Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "The Regulation of Entry," Working Paper 19462, Harvard University OpenScholar.
  5. Kaufmann, Daniel & Kraay, Aart, 2002. "Growth without governance," Policy Research Working Paper Series 2928, The World Bank.
  6. Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
  7. Goldberger, Arthur S, 1972. "Maximum-Likelihood Estimation of Regressions Containing Unobservable Independent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 1-15, February.
  8. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1999. "Contract Intensive Money," MPRA Paper 25717, University Library of Munich, Germany.
  9. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  10. Daniel Kaufmann & Shang-Jin Wei, 2000. "Does 'Grease Money' Speed Up the Wheels of Commerce?," IMF Working Papers 00/64, International Monetary Fund.
  11. Francisco Alcalá & Antonio Ciccone, 2001. "Trade and productivity," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 580, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2002.
  12. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 46(1), pages 269-92, April.
  13. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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Cited by:
  1. Hyun H. Son & Nanak Kakwani, 2006. "Global Estimates of Pro-Poor Growth," Working Papers 31, International Policy Centre for Inclusive Growth.
  2. Son, Hyun H. & Kakwani, Nanak, 2008. "Global Estimates of Pro-Poor Growth," World Development, Elsevier, Elsevier, vol. 36(6), pages 1048-1066, June.
  3. J.W. Fedderke & I. Lourenco & F. Gwenhamo, 2011. "Alternative indices of political freedoms, property rights, and political instability for Zambia," Working Papers 207, Economic Research Southern Africa.
  4. Elizabeth Asiedu & James Freeman, 2008. "The Effect of Corruption on Investment Growth: Evidence from Firms in Latin America, Sub-Saharan Africa and Transition Countries," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200802, University of Kansas, Department of Economics.

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