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Governance Indicators, Aid Allocation and Millennium Challenge Account

Daniel Kaufmann

The Brookings Institution

Aart Kraay

World Bank - Development Research Group (DECRG)

December 2002

Aid works best when it is directed to countries with relatively good institutions and policies. But how should good governance be measured, and how can aid allocation rules be designed in light of the strengths and weaknesses of existing measures? We address in brief a number of methadological and applied challenges, motivated by the U.S. government's recent proposal to allocate resources from the new Millennium Challenge Account (MCA), although the issues and recommendations apply more broadly. Among others, we discuss the implications of margins of error in governance data, the difficulties in measuring trends, and the need to complement existing cross-country indicators with in-depth country diagnostics.

Number of Pages in PDF File: 15

Keywords: Millennium Challenge Account, MCA, Aid Effectiveness, Aid Allocation, Governance Indicators, Governance Data, Corruption

JEL Classification: K42, O10, O19

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Date posted: May 5, 2004  

Suggested Citation

Kaufmann, Daniel and Kraay, Aart, Governance Indicators, Aid Allocation and Millennium Challenge Account (December 2002). Available at SSRN: http://ssrn.com/abstract=534063 or http://dx.doi.org/10.2139/ssrn.534063

Contact Information

Daniel Kaufmann (Contact Author)
The Brookings Institution ( email )
1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6257 (Phone)
HOME PAGE: http://www.thekaufmannpost.net
Aart Kraay
World Bank - Development Research Group (DECRG) ( email )
1818 H. Street, N.W.
Washington, DC 20433
United States
202-473-5756 (Phone)
202-522-3518 (Fax)
HOME PAGE: http://econ.worldbank.org/staff/akraay
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