Post on 28-Feb-2022
1
Governance and Corruption Worldwide:Empirical Evidence and Lessons for Policy
Daniel Kaufmann, The World Bank Institutewww.worldbank.org/wbi/governance
Global Issues Seminar Series,March 1st, 2006
"If you cannot measure it, you cannot improve it."-- Lord Kelvin
2
Challenging Convention – key tenets
1. Governance and Corruption are Unmeasurable
2. Some evidence: Governance has improved globally?
3. Good Governance: outcome of development and growth? – & emerging economies are corrupt…?
4. The trouble is with Public Sector & Officials in LDCs
5. Cultural & Historical Determinism of Corruption
6. Fighting corruption by ‘Fighting Corruption’(Laws, Codes, Campaigns, Agencies & More Regulations)
3
Tenet # 7: Challenging the previous ‘popular notions’
1. Data Matters -- on Governance & Institutions: while ‘sensitive’, & margins of error (not uniquely) – data can be gathered, analyzed, and used judiciously
2. Expanding Beyond the Washington Consensus-- Adding to the Macro and the Structural’/Sectoral: Institutions, Governance and Corruption Matters
3. On Average: stagnation on Governance, and level is low -- Has it become a binding constraint nowadays?
4. Significant variance: some countries show that it is feasible to improve governance in the short term
5. Interventions that have not worked – vs. what may work better in the future? – Transparency, Meritocracy and Deregulation matters – within collective action with private sector, legislative and judiciary
4
Six Dimensions of GovernanceGovernance as the set of traditions and institutions by
which authority in a country is exercised -- specifically:• The process by which those in authority are selected
and replaced – VOICE AND ACCOUNTABILITY – POLITICAL STABILITY & ABSENCE OF
VIOLENCE/TERRORISM• The capacity of government to formulate and
implement policies– GOVERNMENT EFFECTIVENESS– REGULATORY QUALITY
• The respect of citizens and state for institutions that govern interactions among them – RULE OF LAW – CONTROL OF CORRUPTION
5
Voice & Accountability, 2004 (Selected Countries)
-2.5
0
2.5M
YAN
MAR
KORE
A, N
ORT
H
ERI
TREA
TUR
KME
NIS
TAN
SUD
AN
UZB
EKI
STA
N
SYRI
A
SO
MA
LIA
BEL
ARU
S
ZIM
BAB
WE
PAKI
STA
N
EGYP
T
RUS
SIA
VEN
EZU
ELA
MA
DAG
ASC
AR
INDI
A
GHA
NA
ARG
ENTI
NA
KORE
A, S
OUT
H
SOUT
H AF
RIC
A
GRE
ECE
MA
URIT
IUS
URUG
UAY
CHIL
E
EST
ONI
A
PO
LAND
HUNG
ARY
GE
RMAN
Y
NETH
ERL
AND
S
FINL
AND
NO
RWAY
DENM
ARKPoor
Governance
GovernanceLevel
Margins of Error
Good Governance
Source for data: : 'Governance Matters IV: Governance Indicators for 1996-2004’, D. Kaufmann, A. Kraay and M. Mastruzzi, (http://www.worldbank.org/wbi/governance/govdata/); Colors are assigned according to the following criteria: Dark Red, bottom 10th percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
6
Control of Corruption: one Aggregate Indicator (selected countries from 204 worldwide, for illustration, based on 2004 research data)
-2.5
0
2.5EQ
UA
TOR
IAL
GU
INEA
KO
REA
, NO
RTH
TUR
KM
ENIS
TAN
UZB
EKIS
TAN
TAJI
KIS
TAN
BA
NG
LAD
ESH
VEN
EZU
ELA
ZAM
BIA
RU
SSIA
KO
REA
, SO
UTH
MA
UR
ITIU
S
SOU
TH A
FRIC
A
GR
EEC
E
ITA
LY
BO
TSW
AN
A
SLO
VEN
IA
CH
ILE
FRA
NC
E
SPA
IN
UN
ITED
KIN
GD
OM
NET
HER
LAN
DS
NO
RW
AY
NEW
ZEA
LAN
D
FIN
LAN
DPoor Governance
Governance Level
Margins of ErrorGood
Governance
Source for data: : 'Governance Matters IV: Governance Indicators for 1996-2004’, D. Kaufmann, A. Kraay and M. Mastruzzi, (http://www.worldbank.org/wbi/governance/govdata/); Colors are assigned according to the following criteria: Dark Red, bottom 10th percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
7
Government Effectiveness, 2004: World Map
Source for data: : 'Governance Matters IV: Governance Indicators for 1996-2004’, D. Kaufmann, A. Kraay and M. Mastruzzi, (http://www.worldbank.org/wbi/governance/govdata/); Colors are assigned according to the following criteria: Dark Red, bottom 10th percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
8
Judiciary Independence (EOS survey results 1998-2004)
1
4
7
1998 1999 2000 2001 2002 2003 2004
Inde
pend
enci
a de
la J
udic
atur
a
OECD
East Asian NICs
Latin America
NON OECD
HighIndependence
No Independence
9
Are all Countries Stagnating in Governance?
• The world on average has not improved
• But large or small variation across countries?
• New method: for each country, we can identify whether there are significant changes over time
• It is found that changes can take place in the short-term: in 6-to-8 years, some deteriorations as well as some significant improvements as well
10
Changes in Rule of Law, 1996-2004
-2
0
2ZI
MB
AB
WE
IVO
RY
CO
AST
SWA
ZILA
ND
VEN
EZU
ELA
MO
LDO
VA
C. A
FR. R
EP.
ETH
IOPI
A
CU
BA
EGYP
T
GER
MA
NY
U.K
.
NIG
ERIA
UG
AN
DA
JOR
DA
N
RO
MA
NIA
SLO
VAK
REP
.
SER
BIA
SLO
VEN
IA
MO
ZAM
BIQ
UE
MA
LTA
ESTO
NIA
CR
OA
TIA
LITH
UA
NIA
Changes were calculated on the basis of the differences in country estimates from 1996 and 2004. Classification for major deteriorations and improvements were based on 75% confidence interval. Source for data: http://www.worldbank.org/wbi/governance/govdata/.
Major Deterioration
(selected countries)
Major Improvement
(selected countries)
Insignificant Change
11
Governance Indicators: Zimbabwe, 1996/2004
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
12
Croatia 2004 vs.1996
13
Governance Indicators: Chile, 1996/2004
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
14
Governance Matters: The 300% ‘Dividend’1. Large Development Dividend of Good
Governance: a one-standard-deviation improvement in governance raise incomes per capita in a country by about 300% in long-run
2. But is such a decline in corruption unrealistically large?: NO -- One S.D. is the difference from: Eq. Guinea → Iran or Uganda → Mauritius →Portugal → Finland or New Zealand
3. The impact is from governance to incomes, and not viceversa -- higher incomes alone will not do
4. Urgency of interventions to improve governance
15
-1
0
1
Low Voice Middle Voice High VoiceVoice and Accountability
Con
trol
of C
orru
ptio
n
GoodVoice and Accountability vs. Control of Corruption
Source for Control of Corruption: : 'Governance Matters IV: Governance Indicators for 1996-2004’, D. Kaufmann, A. Kraay and M. Mastruzzi, (http://www.worldbank.org/wbi/governance/govdata/).
16
The ‘Mezzo’ Level of Governance Measurement• Based on cross-country surveys, mainly of enterprises –
(such as the EOS of WEF, BEEPS/WBES of WB, etc.)
• Thousands of firms interviewed on a range of issues; focus on governance, specialized questions
• More detailed unbundling of governance and corruption phenomena than aggregate indicators
• Relatively broad country coverage, but less than aggregate governance indicators
• Measuring what is taking place De Facto matters: it uncovers stark realities masked in De Jure indicators
• Addresses empirically: ‘It takes two to “tango”’
17
Some Key Constraints to Business, by Region, Responses from the Firm in EOS 2005
0
10
20
30
40
50
60
70
OECD East Asia NICs East Asiadeveloping
Middle East &North Africa
Latin America
Foreign Currency Bureaucracy Corruption
Tax Regulations Inflation
% firms reporting constraint among top 3:
Source: EOS 2005. The question posed to the firm was: Select among the above 14 constraints the five most problematic factors for doing business in your country.
18
Figure 1: Better Governance is Associated with Higher Country’s Competitiveness
ZWE
VNMVEN
URY
USA
GBRARE
UKRUGA
TUR
TUN
TTO
THA
TZA
TJK
TWNCHE
SWE
LKA
ESP
ZAF
SVN
SVK
SGP
YUGRUS
ROM
QAT PRT
POL
PHL
PER
PRY
PAN
PAK
NOR
NGA
NIC
NZLNLD
NAM
MOZ
MAR
MNG
MDA
MEXMUS
MLT
MLI
MYS
MWI MDG
MKD
LUX
LTULVA
KGZ
KWT
KOR
KEN
KAZ
JOR
JPN
JAM
ITA
ISR IRL
IDN
IND
ISL
HUN
HKG
HND
GUY
GTM
GRC
GHA
DEU
GEOGMB
FRA
FIN
ETH
SLVEGY
ECUTMP
DOM
DNK
CZECYP
HRV CRICOL
CHN
CHL
TCD
CAN
CMRKHM
BGRBRA
BWA
BIHBOL
BEN
BEL
BGD
BHR
AZE
AUT
AUS
ARGDZA
ALB
2
4
6
-2 -1 0 1 2 3Control of Corruption
Glo
bal C
ompe
titiv
enes
s In
dex
Low
Low High
High
r = 0.90
Sources: GCI is from GCR2005/6 by WEF, Control of Corruption from Kaufmann, Kraay and Mastruzzi, ‘Governance Matters IV: Governance Indicators for 1996-2004’.
19
2
3
4
5
6
7
Yaounde Douala Bogota Medellin Vilnius Kaunas Madrid Barcelona
Freq
uenc
y of
Bri
bery
Variance in Governance across cities within same country: Bribery in Procurement as an illustration
High Bribery
Low
Source: author calculations based on EOS firm survey, WEF2003, 271 cities. Question: In your industry, how commonly firms make undocumented extra payments or bribes connected with awarding of public contracts? (7: very common…. 1: never occur)
SpainColombia LithuaniaCameroon
20
Local Services:Local Services:Access to Water, City Governance and GlobalizationAccess to Water, City Governance and Globalization
(Non OECD Sample)(Non OECD Sample)
20%
100%
Acc
ess t
o W
ater
(%)
Poor Governance Good Governance
Control of Corruption
Bribery in Utility State Capture Control of Corruption
Bribery in Utility State Capture
Local City
Global City
Sources: EOS 2003, UN 1998, KK 2002 & KLM 2004
21
The ‘Micro’ Level – In-depth in-country diagnostics for action programs
Key Features of Governance Diagnostic Tools
• Multi-pronged surveys of: households, firms and public officials [‘triangulation’]
• Experiential questions (vs. ‘opinions’/generic) • Local Institution Implements, w/WB Collaboration• Recognizing Multidimensionality of Governance• Focus on Service Delivery• Input for Action and Change: Action Programs
22
Misgoverned vs. well Governed Agencies in-Country (as ranked by public officials, 2000 diagnostic)
0 10 20 30 40 50 60 70 80
Professional Oranizations
The Church
Army
NGOs
Ombudsman
The President of the Republic
Petroecuador
Police
Customs
Transit Council
Congress
The Transit Commission of Guayas
% reporting that the agency is very corrupt
23
Citizen Voice Helps Control Bribery Citizen Voice Helps Control Bribery (Bolivia Diagnostics)(Bolivia Diagnostics)
Based on 90 national, departmental, and municipal agencies covered in the Bolivia Public Officials Survey.
10
20
30
40
50
Low Moderate_Low Moderate_High High
Voice / External Accountability
Brib
ery
Simple Average Association Control Causal Link Margin of Error
24
Policy Implications1. Measuring governance is important2. Measuring Governance is feasible3. Governance Matters: large “development dividend”
• strong causal impact of governance on incomes, but little evidence that higher incomes raise governance
4. The world on average is ‘stagnant’ – but some countries have improved significantly
5. Need to refocus efforts to improve governance • frank questioning of what doesn’t work: -- Anti-Corruption campaigns-- Drafting more laws, codes, and Conventions-- Create additional ethics and A-C agencies-- ‘Blame’ History, Culture or Legal Origins-- ‘Blame’ Reform, Privatization, Globalization
25
What Appears to Work…1. ‘Data Power’ + Transparency Strategy & Reforms
2. Voice and Accountability – incl. Freedom of the Press
3. Subnational Level Reforms and Focus (cities, villages..)
4. Deregulation/ Integrate to world economy & markets
5. Focus on Incentives and on Prevention 6. Meritocratic Civil Service & Oversight Institutions
7. Budgetary/Public Expenditure Reforms
8. Political Finance Reform
9. Role of Corporate/Banking Sectors & Multinationals 10. Judicial Reform
26
Governance Has Improved in Some Groups:e.g. “Pull Effect” of EU Accession
-1.5
-1
-0.5
0
0.5
1
1996 1998 2000 2002 2004
Rul
e of
Law
EUAccessed
ex-SovietUnion (noaccess)
Source for data: http://www.worldbank.org/wbi/governance/govdata/. EU EE Accessed Countries: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, and Slovenia.
High
Low
27
Bibliographical References1. Kaufmann, D., A. Kraay, and M. Mastruzzi. 2005. "Governance Matters
IV: Governance Indicators for 1996-2004." http://www.worldbank.org/wbi/governance/pdf/Synthesis_GovMatters_IV.pdf (synthesis), and, http://www.worldbank.org/wbi/governance/pdf/Synthesis_GovMatters_IV.pdf (full paper)
2. Kaufmann, D. and A. Kraay. 2003. "Governance and Growth: Causality Which Way?" http://worldbank.org/wbi/governance/pdf/growthgov_synth.pdf.
3. Kaufmann, D. 2003. "Rethinking Governance: Empirical LessonsChallenge Orthodoxy." http://worldbank.org/wbi/governance/pdf/rethink_gov_stanford.pdf.
4. Kaufmann, D. 2004. "Corruption, Governance and Security: Challenges for the Rich Countries and the World."http://worldbank.org/wbi/governance/pdf/Kaufmann_GCR_101904_B.pdf.
5. Bellver, A. and D. Kaufmann (2005). "Transparenting Transparency: Initial Empirics and Policy Applications". http://worldbank.org/wbi/governance/pubs/TransparencyIMF.html
Governance Indicators User Interface: http://www.worldbank.org/wbi/governance/govdata/.