Can Disaggregated Indicators Identify Governance Reform Priorities?

53 Pages Posted: 20 Apr 2016

See all articles by Aart Kraay

Aart Kraay

World Bank - Development Research Group (DECRG)

Norikazu Tawara

University of Chicago

Date Written: March 1, 2010

Abstract

Many highly-disaggregated cross-country indicators of institutional quality and the business environment have been developed in recent years. The promise of these indicators is that they can be used to identify specific reform priorities that policymakers and aid donors can target in their efforts to improve institutional and regulatory quality outcomes. Doing so however requires evidence on the partial effects of these many very detailed variables on outcomes of interest, for example, investor perceptions of corruption or the quality of the regulatory environment. In this paper we use Bayesian Model Averaging (BMA) to systematically document the partial correlations between disaggregated indicators and several closely-related outcome variables of interest using two leading datasets: the Global Integrity Index and the Doing Business indicators. We find major instability across outcomes and across levels of disaggregation in the set of indicators identified by BMA as important determinants of outcomes. Disaggregated indicators that are important determinants of one outcome are on average not important determinants of other very similar outcomes. And for a given outcome variable, indicators that are important at one level of disaggregation are on average not important at other levels of disaggregation. These findings illustrate the difficulties in using highly-disaggregated indicators to identify reform priorities.

Keywords: Statistical & Mathematical Sciences, Environmental Economics & Policies, Economic Theory & Research, Governance Indicators, Econometrics

Suggested Citation

Kraay, Aart and Tawara, Norikazu, Can Disaggregated Indicators Identify Governance Reform Priorities? (March 1, 2010). World Bank Policy Research Working Paper No. 5254. Available at SSRN: https://ssrn.com/abstract=1585033

Aart Kraay (Contact Author)

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

Norikazu Tawara

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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