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Ballot papers are seen in a ballot box during the Kenya election in Gatundu in Kiambu county, Kenya August 8, 2017. REUTERS/Baz Ratner - RC18FD07A0B0
Future Development

Measuring the ups and downs of governance

Daniel Kaufmann and Aart Kraay

The 2017 update of the Worldwide Governance Indicators (WGI) was published today. The WGI are a set of composite indicators covering six dimensions of governance for over 200 countries over the two decades from 1996 to 2016: Voice and Accountability; Political Stability and Absence of Violence/Terrorism; Government Effectiveness; Regulatory Quality; Rule of Law; and Control of Corruption

Authors

Aart Kraay

Economist, Development Research Group - World Bank

The WGI bring together information from over 30 different data sources, capturing the experiences and perceptions of thousands of experts and survey respondents worldwide. The data sources include well-known surveys of households and firms, as well as a variety of expert assessments produced by the private sector, nongovernment organizations, and public sector agencies. The WGI website provides interactive access to the six aggregate indicators, the data sources on which they are based, and complete documentation of the methodology.

For the past two decades, the WGI have contributed to informing and quantifying the consensus that good governance is a vital ingredient in development. Governance is, after all, the process by which governments are selected and replaced; it is about the policy choices they make and implement; and it is about the respect of citizens and the state for the laws and traditions that govern their interactions.  Each of these aspects of governance matters for development, and so unsurprisingly rich countries on average rank higher in the WGI than poor countries do. But this association is by no means set in stone.  For example, developing and emerging countries such as Botswana, Costa Rica, and Uruguay rank higher on Control of Corruption than do some richer economies such as Italy and Greece.

While the benefits of good governance are well-understood, weak governance and accompanying poor policy choices often persist—not least because those in positions of authority benefit from the status quo and have the power to preserve it. In these circumstances, public and transparent cross-country data on governance performance can empower those seeking change, by creating incentives for governance reforms.

This may take the form of aid donors such as the U.S. Millennium Challenge Corporation and the European Commission requiring performance benchmarks on cross-country indicators, including the WGI, as conditions for eligibility for their aid programs. Incentives for change can also be created by the private sector, such as through the Disney Corporation’s permitted sourcing countries policy that links its production and sourcing decisions to respect for labor standards and the quality of governance in countries around the world; and by sovereign bond rating agencies that often refer to governance and institutional quality in the justification of their ratings. The WGI are also a key input to specialized country diagnostics, such as the Resource Governance Index (RGI), which assesses the quality of governance in natural resources in 81 countries, empowering civil society and reformers to promote change.

Governance does change, although not always in positive directions; the WGI data provide a window into such changes. Figure 1 illustrates changes over the past 20 years in two of the six WGI measures: Voice and Accountability and Government Effectiveness. Each point corresponds to a country, and the horizontal and vertical axes display the change in the country’s percentile rank (0-100, with higher values indicating better governance) in these two dimensions.

For many countries clustered near zero in the middle of the graph, these changes are small. But many other countries have seen substantial changes in their WGI scores. Recognizing that measuring governance is an uncertain undertaking, the WGI methodology provides margins of error that reflect the precision of governance scores and can be used to assess whether these changes are statistically significant or not. The countries indicated in orange had statistically-significant changes in both Voice and Accountability and Government Effectiveness over the past 20 years. The countries marked in red had significant changes in Voice and Accountability but not Government Effectiveness, while the opposite is true for those countries marked in green

Starting from very different levels, countries such as Georgia, Japan, Rwanda, and Serbia stand out for large improvements in Government Effectiveness, while Indonesia, Tunisia, Liberia, Serbia, and Nigeria saw sharp improvements in Voice and Accountability. On the other hand, countries including Yemen and Venezuela saw sharp declines in both Government Effectiveness and Voice and Accountability.

Figure 1:  Changes in Voice and Accountability and in Government Effectiveness, 1996-2016

global_20170922_governance

To learn more about the dynamics of governance, we can juxtapose countries’ changes in these two dimensions of governance with their current positions. Figure 2 plots country percentile ranks on Voice and Accountability and Government Effectiveness in 2016, with each dot representing a country. Not surprisingly, there is a strong positive relationship—countries that tend to do well in Voice and Accountability also do well in Government Effectiveness. And while the cross-country WGI data in a single graph is insufficient to claim causation, a large body of research supports the notion that these two dimensions of governance are connected—when political systems are open and work well, citizens are better able to hold governments to account to deliver better policies and public services.

The arrows superimposed on Figure 2 indicate the pattern of change in Government Effectiveness and Voice and Accountability over the past 20 years for those countries with statistically significant changes.  Countries with the arrow pointing up and to the right saw improvements in both dimensions of governance, while countries with arrows pointing down and to the left saw declines in both dimensions.  The majority of arrows are clustered in the bottom-left part of the graph—substantial changes in Government Effectiveness and Voice and Accountability in either direction are most likely to occur in the bottom half of the distribution of these two dimensions of governance.  In contrast, there are relatively few arrows pointing in any direction in the top-right corner—strong Voice and Accountability and Government Effectiveness tend to persist in countries where they are well-established.

Figure 2: Voice and Accountability and Government Effectiveness, 2016

(Arrows indicate changes between 1996-2016 for selected countries)

global_20170922_gov_effectiveness

A handful of countries such as Serbia, Indonesia, and Georgia have managed to vault from being in the bottom half of countries worldwide in both dimensions in 1996 (in the bottom-left part of the graph), to being in the top half of countries in both dimensions in 2016 (in the top-right part of the graph).  In contrast, there is not a single country making the leap from the bottom right part of the graph (with above-average Government Effectiveness but below-average Voice and Accountability), to the top-right part of the graph (with above-average performance on both Government Effectiveness and Voice and Accountability). The declines in Voice and Accountability observed in a number of middle- and high-income countries such as Hungary, Turkey, Venezuela, and Russia, remind us that there is no pre-ordained linear progress in Voice and Accountability as economic transitions take place. These patterns cast doubt on the argument that improvements in economic governance will eventually be followed by greater accountability.

Sustained progress in governance requires citizens to hold their leaders and governments accountable, and open access to data on governance can be a valuable tool for empowering agents of change.

This blog was first launched in September 2013 by the World Bank in an effort to hold governments more accountable to poor people and offer solutions to the most prominent development challenges. Continuing this goal, Future Development was re-launched in January 2015 at brookings.edu.

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