Rethinking Governance: Empirical Lessons Challenge Orthodoxy

Abstract:     
We review key issues in worldwide governance and present the latest findings related to empirical measurement in this field. We focus on key governance components, such as rule of law, voice and accountability, corruption control, and state capture by region and for selected countries. The recent evidence suggests a rather sobering picture: Scant progress in improving rule of law and governance, controlling corruption, and improving institutional quality worldwide is apparent, with clear variance across countries. Further, the empirical analysis points to the private sector as influencing public governance, thereby challenging traditional notions of the functioning of politicians, public policy and the public sector, and the key determinants of the investment climate. These argue for revisiting conventional approaches to promote institutional reform. In particular, we challenge the effectiveness of passing laws by fiat, creating new public institutions and anti-corruption 'campaigns', as well as traditional approaches to public sector management and legal/judiciary reform (often 'Western' transplants) in many emerging markets. We argue instead for greater external accountability, with a larger role for i) transparency mechanisms; ii) empirically-based monitoring tools; and, iii) 'voice' and incentive-driven approaches to provide checks and balances on traditional public institutions, empower non-traditional stakeholders, ameliorate state capture, and level the unequal 'influence' playing field. This calls for deeper examination of the private-public governance nexus and we make specific recommendations regarding governance strategies for the next phase.

Keywords: governance, empirical analysis, corruption, rule of law, accountability, state capture, public policy, public sector management, transparency, indicators

JEL Classifications: E0,H0,H4,K0,K2,K4,L1,L2,L5,M2,O1,P0,P5

Working Paper Series