Aggregating Governance Indicators

42 Pages Posted: 5 Nov 1999

See all articles by Daniel Kaufmann

Daniel Kaufmann

Results for Development; The University of the Philippines Diliman; The Brookings Institution

Aart Kraay

World Bank - Development Research Group (DECRG)

Pablo Zoido

Stanford University - Graduate School of Business

Date Written: October 1999


In recent years, the growing interest of academics and policymakers in governance has been reflected in the proliferation cross-country indices measuring various aspects of governance. In this paper we explain how a simple variant of an unobserved components model can be used to combine the information from these different sources into aggregate governance indicators. The main advantage of this method is that it allows us to quantify the precision of the both individual sources of governance data as well as the aggregate governance indicators. We will illustrate the methodology by constructing aggregate indicators of bureaucratic quality, rule of law, and graft, for a large sample of 160 countries. Although these aggregate governance indicators are more informative about the level of governance than any individual indicator, the standard errors associated with estimates of governance are still large relative to the units in which governance is measured.

JEL Classification: C1, C3, C42, C43, D8, HO, H4, KO, K2, K4

Suggested Citation

Kaufmann, Daniel and Kraay, Aart and Zoido, Pablo, Aggregating Governance Indicators (October 1999). Available at SSRN: or

Daniel Kaufmann

Results for Development ( email )

1875 Connecticut Avenue, NW, Suite 1210
Washington, DC 20009
United States

HOME PAGE: http://

The University of the Philippines Diliman ( email )


The Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States


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)


Pablo Zoido (Contact Author)

Stanford University - Graduate School of Business ( email )

Stanford, CA 94305
United States