Underlying Dimensions of Knowledge Assessment: Factor Analysis of the Knowledge Assessment Methodology Data

Author:  Derek H. C. Chen and Kishore Gawande
World Bank Policy Research Working Paper 4216 (April 2007)

The Knowledge Assessment Methodology (KAM) database measures variables that are used to provide an assessment of countries' readiness for the knowledge economy, and therefore has many policy uses. Formal analysis employing KAM data is faced with the problem of which variables to choose and why. Rather than make these decisions in an ad hoc manner, this paper recommends factor-analytic methods to distill the information contained in the many KAM variables into a smaller set of  "factors". 

The main objective of this paper is to quantify the factors for each country, and do so in a way that allows comparisons of the factor scores over time. Both principal components as well as true factor analytic methods are used, and the paper emphasizes simple structures that help to not only provide a clear political-economic meaning of the factors, but also allow comparisons over time. The results provide mathematical justification for WBI's Knowledge Economy Framework and the KAM's Knowledge Economy Index (KEI).