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Governance Matters IV: Governance Indicators for 1996-2004


Daniel Kaufmann


The Brookings Institution

Aart Kraay


World Bank - Development Research Group (DECRG)

Massimo Mastruzzi


World Bank Institute

May 2005

World Bank Policy Research Working Paper Series No. 3630

Abstract:     
Kaufmann, Kraay and Mastruzzi present the newly updated estimates of six dimensions of governance covering 209 countries and territories for five time periods: 1996, 1998, 2000, 2002 and 2004. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance, and use an unobserved component model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of error for each country for the four periods. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors provide examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure.

The paper also analyzes in some detail changes over time in our estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for our aggregate indicators than for any individual indicator. While they find that the quality of governance in a number of countries has changed significantly (in both directions), the authors also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, the authors interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low income countries.

Number of Pages in PDF File: 135

Keywords: governance, indicators, voice, accountability, corruption, rule of law, government, margins of error, millennium challenge account, political stability, transparency

JEL Classification: E00,H00,O10,C1,C3,C42,C43,D8,HO,H4,K0,K2,K4

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Date posted: May 5, 2005  

Suggested Citation

Kaufmann, Daniel and Kraay, Aart and Mastruzzi, Massimo, Governance Matters IV: Governance Indicators for 1996-2004 (May 2005). World Bank Policy Research Working Paper No. 3630. Available at SSRN: http://ssrn.com/abstract=718081 or http://dx.doi.org/10.2139/ssrn.718081

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.
MSN3-311
Washington, DC 20433
United States
202-473-5756 (Phone)
202-522-3518 (Fax)
HOME PAGE: http://econ.worldbank.org/staff/akraay
Massimo Mastruzzi
World Bank Institute ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
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