1Measuring Good Governance: Kaufmann-KrayKaufmannKray2Outline1. Assumption, definition, and data sources 2. Constructing aggregate indicators3. Interpreting i) Levels; ii) Changes; and iii) Trends:4. Uses and Limitations of Governance indicators•Why subjective data?• Margins of error for objective indicators?• Ideological biases in expert assessments?• Margins of error and aid allocation rules?5. Summary, implications & discussion exercise3Discussion Exercise1. What is meant by the concept of ‘good governance’ and what are itscentral components?2. How would you evaluate the pros and cons of using expert orrepresentative surveys to assess perceptions of good governance?3.WhichoftheevaluativecriteriaselectedbyKaufmann-Kraywouldyou3.WhichoftheevaluativecriteriaselectedbyKaufmannKraywouldyouprioritize in assessing the performance of good governance, and why?What criteria would you add or delete?4. If you were to carry out an expert survey, how would you design asampling frame to collect the perceptions in each country? Who wouldyou include? How could you insure that your sample would be‘representative’?5. How will you use KK in your reports?4Evaluating the good governance indicatorsRecap: Munck and Verkuilen’s criteria– Valid? – Measures the underlying concept– Reliable? – Can be repeated consistently–Comprehensive?–Covers all major dimensions of concept– Equivalence across societies? – Measures like-with-like– Replicable? – Can be recreated using the same steps– Balanced? – Not skewed towards only partial aspect– Robust? – Generates same results in analysis– Value bias? – Generates consensus 5Measuring Good Governance Governance Matters VI: Indicators for 1996-2006Daniel Kaufmann, Aart Kraay andDaniel Kaufmann, Aart Kraay and Massimo MastruzziThe World BankFor details see: http://info.worldbank.org/governance/wgi2007/Data is in the shared Global Indicators dataset627Good governance assumptions• Instrumental goals: • Targeting aid towards countries with good institutions and policies makes sense for efficient investment of limited resources• Transparency:• Using publicly-available eligibility criteria encourages monitoring, accountability, progress• Implementation:• Therefore need effective, comprehensive, reliable and accurate indicators of ‘good governance’8Good governance & democracy9DefinitionGovernance: the traditions & institutions by which authority is exercised. This includes:1. The process by which those in authority are selected and replacedVOICE & ACCOUNTABILITY•VOICE & ACCOUNTABILITY;• POLITICAL STABILITY & ABSENCE OF VIOLENCE2. The capacity of government to formulate and implement policies • GOVERNMENT EFFECTIVENESS• REGULATORY QUALITY3. The respect of citizens and state for institutions that govern interactions among them• RULE OF LAW,• CONTROL OF CORRUPTION10Six indicators of good governance1. Voice and accountabilityCitizen participation, independent media2. Political instability and violenceThreat of state coup 3 G t ff ti3. Government effectivenessQuality of civil service4. Regulatory burden“Market-unfriendly” policies5. Rule of lawPerceptions of crime, effective judiciary,enforceable contracts6. Corruption– Perceptions of corruption11Data sources“Perceptions” (subjective) data on governance from 25 different sources constructed by 18 different organizationsData sources include cross-country surveys of firms, commercial risk-rating agencies, think-tanks, government agencies, international organizations, etc.Over 200 proxies for various dimensions of governanceOrganize these measures into six clusters corresponding to definition of governance, for four periods: 1996, 1998, 2000,and 2002, covering up to 199 countries12Why Subjective Governance Data?1. For some dimensions (e.g. corruption), no cross-country objective data exist• Limited quantitative measures of corruption focus differences in procurement costs relative to materials purchased2. Subjective data can pick up crucial distinction between de jure and de facto institutional arrangements –• Most countries in the world now have elections, anti-corruption commissions, and decent anticorruption laws in the books3. Perceptions do matter313Methodological issuesPolls of experts reliable and valid?– Small N.– Colored by economic outcomes?– Ideological agenda of rating organizations?Representative surveys reliable?– Larger N.– Interpreted in culturally-specific ways?– Often in smaller range of countries14Sources• Cross-Country Surveys of Firms: – Global Competitiveness Survey, World Business Environment Survey, World Competitiveness Yearbook, BEEPS• Cross-Country Surveys of Individuals:Gll It ti lLti b t Af b t–Gallup International, Latinobarometro, Afrobarometer• Expert Assessments from Commercial Risk Rating Agencies:– DRI, PRS, EIU, World Markets Online,• Expert Assessments from NGOs, Think Tanks:– Reporters Without Borders, Heritage Foundation, Freedom House, Amnesty International• Expert Assessments from Governments, Multilaterals: – World Bank CPIA, EBRD, State Dept. Human Rights ReportInputs for Governance Indicators 2002Publisher Publication Source Country Coverage•Wefa’s DRI/McGraw-Hill Country Risk Review Poll 117 developed and developing•Business Env. Risk Intelligence BERI Survey 50/115 developed and developing•Columbia University Columbia U. State Failure Poll 84 developed and developing•World Bank Country Policy & Institution Assessment Poll 136 developing•Gallup International Voice of the People Survey 47 developed and developing•Business Env. Risk Intelligence BERI Survey 50/115 developed and developing•EBRD Transition Report Poll 27 transition economies•Economist Intelligence Unit Country Indicators Poll 115 developed and developing•Freedom House Freedom in the World Poll 192 developed and developing•Freedom House Nations in Transit Poll 27 transition economies•World Economic Forum/CID Global Competitiveness Survey 80 developed and developing•Heritage Foundation Economic Freedom Index Poll 156 developed and developing•Latino-barometro LBO Survey 17 developing•Political Risk Services International Country Risk Guide Poll 140 developed and developing•Reporters Without Borders Reporters sans frontieres (RSF) Survey 138 developed and developing•World Bank/EBRD BEEPS Survey 27 transition economies•IMD, Lausanne