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Defining governance matters: A factor analytic assessment of governance institutions


  • Givens, David


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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    Cited by:

    1. 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.
    2. Hendrix, Cullen & Noland, Marcus, 2015. "Myanmar: Cross-Cutting Governance Challenges," ADB Economics Working Paper Series 428, Asian Development Bank.
    3. Standaert, Samuel, 2015. "Divining the level of corruption: A Bayesian state-space approach," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 782-803.
    4. Cullen S. Hendrix & Marcus Noland, 2014. "Managing Myanmar's Resource Boom to Lock in Reforms," Policy Briefs PB14-11, Peterson Institute for International Economics.

    More about this item


    Governance; Civil liberties; Property rights; Factor model;

    JEL classification:

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


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