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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. Laura Langbein & Stephen Knack, 2010. "The Worldwide Governance Indicators: Six, One, or None?," The Journal of Development Studies, Taylor and Francis Journals, vol. 46(2), pages 350-370.
  2. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  3. Berthelemy, Jean-Claude & Tichit, Ariane, 2002. "Bilateral Donors' Aid Allocation Decisions: A Three-dimensional Panel Analysis," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Stanislav Kolenikov, 2009. "Confirmatory factor analysis using confa," Stata Journal, StataCorp LP, vol. 9(3), pages 329-373, September.
  5. 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.
  6. 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.
  7. N. Hermes & R. Lensink, 2001. "Changing the Conditions for Development Aid: A New Paradigm?," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 1-16.
  8. 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.
  9. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer, vol. 39(1), pages 31-36, March.
  10. 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.
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