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Rethinking Governance: Empirical Lessons Challenge Orthodoxy


  • Daniel Kaufmann

    (The World Bank)


In this discussion draft, linking research findings with concrete operational challenges, we review key issues in worldwide governance, and present recent empirical evidence. Focusing on defining and unbundling key governance components, such as rule of law, voice and accountability, corruption control, and state capture, we then provide evidence which suggests a sobering picture: on average, there appears to be scant progress worldwide in recent times in improving rule of law and governance, in controlling corruption, and in improving institutional quality -- although there is clearly variance across countries. Further, recent empirical research points to the private sector as influencing public governance, thereby challenging traditional notions of the functioning of politicians, public policy and the public sector, and on the conventional determinants of the investment climate. We posit that the interplay between the elite’s vested interests and the political dynamics within a country, in turn affecting governance and corruption, has often been under-emphasized in program design. These argue for revisiting conventional approaches to promote institutional reform. In particular, we challenge the notion that passing laws by fiat, creating new public institutions, or embarking on anti-corruption 'campaigns', can be very effective, and question the value of traditional public sector management and conventional legal/judiciary reform approaches for many emerging economies. We argue instead that sharper focus on external accountability is required, focusing on: transparency mechanisms and empirically-based monitoring tools (including e*governance), as well as participatory 'voice' and incentive-driven approaches for prevention. These need to feature more prominently in providing checks and balances on traditional public institutions, in empowering non-traditional stakeholders, and in ameliorating state capture and mitigating the very ‘unequal influence' playing field in many countries. In turn, this necessitates probing deeper into the private-public governance nexus, which inter alia leads to focusing on concrete measures to address the challenges of political contestability, political financing reform, and transparency in parliaments, the judiciary and the executive. Recommendations on governance strategies for the next phase are suggested, including on the role of the international community.

Suggested Citation

  • Daniel Kaufmann, 2003. "Rethinking Governance: Empirical Lessons Challenge Orthodoxy," Macroeconomics 0308007, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0308007 Note: Type of Document - Acrobat PDF; pages: 47

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    References listed on IDEAS

    1. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
    2. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
    3. Williamson, John, 2000. "What Should the World Bank Think about the Washington Consensus?," World Bank Research Observer, World Bank Group, vol. 15(2), pages 251-264, August.
    4. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    5. Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
    6. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    7. Sen, Amartya, 1983. "Development: Which Way Now?," Economic Journal, Royal Economic Society, vol. 93(372), pages 742-762, December.
    8. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
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    Cited by:

    1. Outreville, J. Francois, 2007. "Foreign affiliates of the world largest financial groups: Locations and governance," Research in International Business and Finance, Elsevier, vol. 21(1), pages 19-31, January.
    2. Anja Linder & Carlos Santiso, 2003. "Not Everything that Counts Can be Counted: A Critical Look at Risk Ratings and Governance Indicators," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 29, pages 105-132.
    3. Resnick, Danielle & Birner, Regina, 2006. "Does good governance contribute to pro-poor growth?: a review of the evidence from cross-country studies," DSGD discussion papers 30, International Food Policy Research Institute (IFPRI).
    4. Benoît Prévost, 2004. "Droits et lutte contre la pauvreté : où en sont les Institutions de Bretton Woods ?," Mondes en développement, De Boeck Université, vol. 128(4), pages 115-124.
    5. World Bank, 2007. "Bangladesh : Strategy for Sustained Growth, Volume 1. Summary Report," World Bank Other Operational Studies 7765, The World Bank.
    6. Kaarel Kilvits & Alari Purju, 2005. "Structure of Public Governance Institutions and Their Impact on Delocalisation of Labour-Intensive Industries," Working Papers 130, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    7. Denyer Willis, Graham & Mota Prado, Mariana, 2014. "Process and Pattern in Institutional Reforms: A Case Study of the Police Pacifying Units (UPPs) in Brazil," World Development, Elsevier, vol. 64(C), pages 232-242.

    More about this item


    governance; empirical analysis; corruption; rule of law; accountability; state capture; public policy; public sector management; transparency; indicators;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • H0 - Public Economics - - General
    • H4 - Public Economics - - Publicly Provided Goods
    • K0 - Law and Economics - - General
    • K2 - Law and Economics - - Regulation and Business Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P0 - Economic Systems - - General
    • P5 - Economic Systems - - Comparative Economic Systems

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