Measuring & Monitoring Governance in Developing Countries

Stephen KnackThe World Bank

2nd International RoundtableMarrakesh, Feb. 2004

Governance: World Bank definition

“Good Governance is epitomized by predictable, open and enlightened policy making (that is, transparent processes); a bureaucracy imbued with a professional ethos; an executive arm of government accountable for its actions; and a strong civil society participating in public affairs; and all behaving under the rule of law.”

Governance and the MDGs

Governance matters for:•Poverty reduction (via investment & growth)•Education & health outcomes (via higher incomes and quality of public service delivery)

Which governance indicator is “best” depends on the purpose

Performance v. process Comparison at point in time

across countries (e.g. for aid allocation)

Measuring progress over time within individual countries (PRSP)

Measuring progress over time for groups of countries (Global monitoring)

Measures used in early research

Freedom House•Civil liberties•Political freedoms

Political violence frequencies•Coups, attempted coups•Assassinations, civil wars•Riots, strikes

Trend in civil liberties (Freedom House)

YEAR

20022001200019991998199719961995

Va

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4.5

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3.5

3.0

2.5

2.0

All developing

IDA

LICUS

Political risk ratings

•International Country Risk Guide

•Business International

•Business Environ. Risk Intelligence

ICRG: International Country Risk Guide Corruption in government Quality of bureaucracy Law & order tradition (rule of law) Risk of government repudiation of

contracts Risk of expropriation Democratic accountability Ethnic tensions

Growth & ICRG index (partial plot)

ICRG (residual)

151050-5-10-15

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Aggregating Governance Indicators

TI: Corruption Perceptions IndexWBI (Kaufmann/Kraay): Voice and accountability Political stability Government effectiveness Regulatory quality Rule of Law Control of corruption

CPIA: Country Policy & Institutional

Assessment Property Rights & Rule-based

governance Quality of budgetary & financial

management Efficiency of revenue mobilization Quality of public administration Transparency, accountability &

corruption in the public sector

Broad indicators of quality of governance

Demonstrate importance of governance for economic outcomes

Help in identifying political & social factors underlying governance problems

Indicate countries for which governance may be most severe obstacle to growth, effective service delivery

Need for more specific governance indicators

At country level: Identify areas where

reforms needed Monitor progress over timeResearch: Identify which institutional

arrangements are most important

what can be done

Importance of transparency and replicability of measurement

Country “ownership” often requires more transparently constructed and replicable indicators

Ownership is also influenced by specificity--governments may resist indicators that seem accusatory & do not suggest particular solutions

Surveys of businesses, public officials, households

administrative corruption vs. state capture (BEEPS/WBES)

corruption, employee morale, credibility of rules and policies, resource predictability across agencies (WB public officials surveys)

quality of service delivery (Bangalore Report Cards, Barometer surveys)

Assessment of budgeting systems in HIPCs

budget formulation: coverage, inclusion of donor funds, classification system, multiyear projections

budget execution: internal control, tracking reliability

budget reporting: regularity of reports, delays in final audited accounts

“Doing Business”

Number of procedures, fees, time required to start a new business

Number of procedures, time required to collect on a bad debt or to evict a non-paying tenant

Creditor rights Employment regulation Bankruptcy rules

Other “objective” performance measures

Tax revenue as share of GDP Trade tax revenue as share of

all revenue Budgetary volatility Revenue source volatility Survey responses:

bribes/revenues, frequency of power outages, teacher absences, doctor absences

Cross-National Data on Government Employment and Wages

Employment in civil service, health, education, and police in central and sub-national government

Central government wage bill, as share of government spending and GDP

Average central government wage, relative to per capita income and wages in manufacturing, financial services and private sector

Vertical compression ratio

Corruption & Civil service pay

Civil service pay/per capita GDP

121086420

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Database on Political Institutions (DPI)

• Coverage: 1975-present for 177 countries Content: 113 variables on elections & electoral

rules, party composition of opposition & governing coalitions, indexes of political stability & checks & balances

Applications: receptivity to economic reform, political roots of corruption, sources of the rule of law, management of ethnic divisions