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Governance Indicators, Aid Allocation, and the Millennium Challenge Account

Author

Listed:
  • Daniel Kaufmann

    (The World Bank)

  • Aart Kraay

    (The World Bank)

Abstract

Aid works best when it is directed to countries with relatively good institutions and policies. But how should good governance be measured, and how can aid allocation rules be designed in light of the strengths and weaknesses of existing measures? We address in brief a number of methodological and applied challenges, motivated by the U.S. government's recent proposal to allocate resources from the new Millennium Challenge Account (MCA), the issues and recommendations apply more broadly. Among others, we discuss the implications of margins of error in governance data, the difficulties in measuring trends, and the need to complement existing cross-country indicators with in-depth country diagnostics.

Suggested Citation

  • Daniel Kaufmann & Aart Kraay, 2004. "Governance Indicators, Aid Allocation, and the Millennium Challenge Account," Development and Comp Systems 0405013, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0405013
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    Cited by:

    1. Faria, Andr & Mauro, Paolo, 2009. "Institutions and the external capital structure of countries," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 367-391, April.
    2. Cogneau, Denis & Naudet, Jean-David, 2007. "Who Deserves Aid? Equality of Opportunity, International Aid, and Poverty Reduction," World Development, Elsevier, vol. 35(1), pages 104-120, January.

    More about this item

    Keywords

    Millennium Challenge Account; MCA; Aid Effectiveness; Aid Allocation; Governance Indicators; Governance Data;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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