Governance Matters IV: Governance Indicators for 1996-2004

135 Pages Posted: 5 May 2005

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)

Massimo Mastruzzi

World Bank Institute

Date Written: May 2005


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.

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

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 Series No. 3630, Available at SSRN: or

Daniel Kaufmann (Contact Author)

Results for Development ( email )

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Washington, DC 20009
United States

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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)


Massimo Mastruzzi

World Bank Institute ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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