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The Good Governance Indicators of the Millennium Challenge Account: How many dimensions are really being measured

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  • Knoll, Martin
  • Zloczysti, Petra

Abstract

This paper assesses the validity of the perception-based governance indicators used by the US Millennium Challenge Account (MCA) for aid allocation decisions. By conducting Explanatory and Confirmatory Factor Analysis of data from 1996 to 2009, we find that although the MCA purports to measure seven distinct dimensions of governance, only two discrete underlying dimensions, the 'participatory dimension of governance' and the 'overall quality of governance' can be identified. Our results also show that some of the doubts that have been raised concerning the validity of perception-based governance indicators are less warranted when the indicators are applied exclusively to developing countries. --

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Bibliographic Info

Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2011/2.

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Date of creation: 2011
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Handle: RePEc:zbw:fubsbe:20112

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Keywords: Aid Allocation; Governance Indicators; Factor Analysis; MCA;

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  1. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  2. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
  3. Chhotray, Vasudha & Hulme, David, 2009. "Contrasting Visions for Aid and Governance in the 21st Century: The White House Millennium Challenge Account and DFID's Drivers of Change," World Development, Elsevier, vol. 37(1), pages 36-49, January.
  4. Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2010. "Response to ‘What do the Worldwide Governance Indicators Measure?’," The European Journal of Development Research, Palgrave Macmillan, vol. 22(1), pages 55-58, February.
  5. Michael A. Clemens & Steven Radelet, 2003. "The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough?," Working Papers 23, Center for Global Development.
  6. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
  7. Stas Kolenikov, 2006. "Confirmatory factor analysis in Stata," North American Stata Users' Group Meetings 2006 4, Stata Users Group.
  8. Laura Langbein & Stephen Knack, 2010. "The Worldwide Governance Indicators: Six, One, or None?," Journal of Development Studies, Taylor & Francis Journals, vol. 46(2), pages 350-370.
  9. Michela Nardo & Michaela Saisana & Andrea Saltelli & Stefano Tarantola & Anders Hoffman & Enrico Giovannini, 2005. "Handbook on Constructing Composite Indicators: Methodology and User Guide," OECD Statistics Working Papers 2005/3, OECD Publishing.
  10. M A Thomas, 2010. "What Do the Worldwide Governance Indicators Measure?," The European Journal of Development Research, Palgrave Macmillan, vol. 22(1), pages 31-54, February.
  11. N. Hermes & R. Lensink, 2001. "Changing the Conditions for Development Aid: A New Paradigm?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 1-16.
  12. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "The worldwide governance indicators project : answering the critics," Policy Research Working Paper Series 4149, The World Bank.
  13. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer, vol. 39(1), pages 31-36, March.
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Cited by:
  1. Knoll, Martin, 2013. "The heavily indebted poor countries and the multilateral debt relief initiative: A test case for the validity of the debt overhang hypothesis," Discussion Papers 2013/11, Free University Berlin, School of Business & Economics.
  2. Lebovic, James H., 2014. "The Millennium Challenge Corporation: Organizational Constraints on US Foreign Aid, 2004–11," World Development, Elsevier, vol. 58(C), pages 116-129.

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