Indicators By World Bank Research Called “Best Measure” Of Quality Of Governance Worldwide

WASHINGTON, July 9, 2003--A newly updated set of indicators by researchers at the World Bank tracking the quality of governance across the globe has been recognized as the most effective measurement tool to assess how countries perform in this critical area of development.

The indicators, covering almost 200 countries, trace six areas of governance from 1996 to the present.  These indicators, to be continually updated, create a unique source of valuable benchmarks for policy makers, donor agencies, civil society and development experts.  

“All in all, this is the most comprehensive and best-quality database available on governance indicators,” writes Steven Radelet from the Center for Global Development in a review in his new book, Challenging Foreign Aid. 

The researchers confirmed that governance plays a critical role in development outcomes.  It is increasingly one of the key factors that determines whether a country has the capacity to use resources effectively to reduce poverty. Measuring governance has traditionally been an elusive challenge, but one that is crucial in understanding the link between governance and development, and for enabling countries to monitor their performance.

In constructing these indicators, Daniel Kaufmann and Aart Kraay of the World Bank have debunked the myth that governance is too hard to define or measure. This research initiative, started in 1998, has created six indicators to measure governance and track country performances over time. The indicators are available through the following link:  http://www.worldbank.org/wbi/governance/govdata2002/

The indicators are based on 25 separate data sources at 18 different organizations, including the World Bank itself, Gallup International, the Economist Intelligence Unit, IMD, DRI/McGraw-Hill, Columbia University, Freedom House, Afrobarometer,  Latinobarometro, the World Economic Forum, and Reporters Without Borders.  The database covers four time periods (1996, 1998, 2000 and 2002) and will be updated regularly.

Such indicators have long been sought by professionals and policy makers in the development field, as well as by academics and civil society.  The data gives the international donor community a new tool for enhancing development results through improved monitoring of governance performance.

The U.S. has recognized this by drawing heavily upon the Kaufmann and Kraay research and indicators for their new Millennium Challenge Account, while other governments as well as nongovernmental organizations (NGOs) are using these indicators for analysis, and for promoting change within their countries.

Kaufmann, Director of Global Governance at the World Bank Institute, suggests that the indicators are a valuable resource for civil society, journalists, and countries engaging in peer review or self-assessment.  The World Bank uses these  indicators  to help countries identify areas of weakness so that  capacity building and assistance strategies are more effective.  But the authors also caution against using this data to run “horse races” among countries with similar ratings.  While the researchers' methodology reduces the margins of error, those margins of error can still be large enough to make precise rankings of  similarly rated countries impossible.   

Kaufmann and Kraay define governance as the traditions and institutions by which authority in a country is exercised. To create the indicators, they divided the concept of governance into six categories aimed at capturing how governments are selected, monitored, and replaced; a government’s capacity to formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern them. The six measured indicators are:

1.      Voice and Accountability
2.      Political Stability and Lack of Violence
3.      Government Effectiveness
4.      Regulatory Quality
5.      Rule of Law
6.      Control of Corruption.

The governance indicators interactive web page allows the user to compare a single country’s performance across all six governance indicators, or to compare several countries against one of the six measures, and to instantly produce any chart, table or governance map of their choosing. 

The data also has major applications for research.  In their work, the authors have found a significant ‘good governance dividend’:  countries that improve their rule of law, control corruption and promote voice and democratic accountability can expect about a four-fold increase in incomes per capita in the long term, and major improvement in literacy and in child mortality. 

The researchers also dispelled the myth that good governance is a ‘luxury’ that only wealthy countries can afford, as exemplified by emerging economies with good governance, such as Botswana, Chile or Slovenia.  They found that a country that has an income windfall from, for example, higher oil prices, would not automatically benefit in terms of improved governance. To the contrary. 

Income growth alone does not guarantee better rule of law or improved voice and democratic accountability.  Governance reforms are continuously required instead, and they then result in higher incomes.  

Emerging nations themselves are increasingly becoming proponents of utilizing these indicators as a way of monitoring and focusing attention on governance issues. This data and the conclusions that emerge from it were featured in the opening plenary presentation at the recent worldwide conference on Anti-Corruption in Seoul, Korea, as well at the Africa Economic Summit of the World Economic Forum held in Durban, South Africa in mid-June.

At the closing session of the Africa Economic Summit,  former Finance Minister of Ghana Kwezi Botchwey lauded the rigor and worldwide coverage of these indicators and urged the one thousand-strong audience to utilize them for a credible peer monitoring mechanism among countries participating in the New Partnership for Africa’s Development (NEPAD).    

For Q&A on the Indicators:   http://info.worldbank.org/governance/kkz2002/q&a.html                                                  

For research results: http://www.worldbank.org/wbi/governance/wp-governance.html

For details on the challenges in using indicators in aid allocation decisions, see: http://www.worldbank.org/wbi/governance/pubs/mca.html

For information on the anti-corruption conference in Seoul, see: http://www.worldbank.org/wbi/governance/events/korea.html#gfiii

For information on the Africa Economic Summit, see: http://www.worldbank.org/wbi/governance/  

For a synthesis of common fallacies on indicators, and the answer to them:  http://www.worldbank.org/wbi/governance/pdf/govmatters3_synth.pdf