The Worldbank Worldwide Governance Indicators

1. The WorldbankWorldwide Governance Indicators http://info.worldbank.org/governance/wgi/index.asp

2. Six Key Dimensions of Governance The WGI authors define governance as the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. The WGI measure six broad definitions of governance capturing the key elements of this definition: 1. Voice and Accountability:the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media. 2. Political Stability and Absence of Violence/Terrorism:the likelihood that the government will be destabilized by unconstitutional or violent means, including terrorism. 3. Government Effectiveness:the quality of public services, the capacity of the civil service and its independence from political pressures; and the quality of policy formulation. 4. Regulatory Quality: the ability of the government to provide sound policies and regulations that enable and promote private sector development. 5. Rule of Law:the extent to which agents have confidence in and abide by the rules of society, including the quality of contract enforcement and property rights, the police, and the courts, as well as the likelihood of crime and violence. 6. Control of Corruption:the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

3. Data Sources for the Worldwide Governance Indicators Surveys of Households and Firms:Afrobarometer; AmericasBarometer; Business Environment and Enterprise Performance Survey; Gallup World Poll; Global Competitiveness Report; Global Corruption Barometer; Latinobarometer; Political Economic Risk Consultancy; World Competitiveness Yearbook. Commercial Business Information Providers:Business Environment Risk Intelligence; Economist Intelligence Unit; Global Insight; iJET Country Security Ratings; Merchant International Group; Political Risk Services. Nongovernmental Organizations:Bertelsmann Transformation Index; Freedom House; Global E-Governance Index; Global Integrity Index; Heritage Foundation; International Research and Exchanges Board; Reporters Without Borders; Open Budget Index. Public Sector Organizations:African Development Bank, Asian Development Bank and World Bank Country Policy and Institutional Assessments; Cingranelli-Richards Human Rights Database; European Bank for Reconstruction and Development Transition Report; French Ministry of Finance Institutional Profiles Database; International Fund for Agricultural Development Rural Sector Performance Assessments; OECD Development Center African Economic Outlook; U.S. State Department Trafficking in Persons Report.

4. 90th-100th Percentile (extremely high) 75th-90th Percentile (high) 50th-75th Percentile (around average) 25th-50th Percentile (low) 10th-25th Percentile (very low) 0th-10th Percentile (extremely low)

18. The Worldwide Governance Indicators: Critiques and Responses (by World Bank) The Worldwide Governance Indicators (WGI) are among the most widely-used cross-country governance indicators currently available. The WGI report on six dimensions of governance for over 200 countries for the period 1996-2006, and are based on hundreds of underlying individual indicators drawn from 30 different organizations, relying on responses from tens of thousands of citizens, enterprise managers, and experts. The WGI have also attracted some specific written critiques. The following briefly summarizes the major critiques and the answers provided by the World Bank.

19. 1. Comparability over time and across countries. Several critics have raised concerns about the over-time and cross-country comparability of the WGI, noting that (i) the WGI use units that set the global average of governance to be the same in all periods; (ii) comparisons of pairs of countries, or single countries over time using the WGI will be based on different sets of underlying data sources; and (iii) there are substantial margins of error in the aggregate WGI. In response, we note that (i) we have documented for several years that there is no clear evidence of a clear trend in one direction or another in global averages of governance on any of our underlying individual data sources (the overall evidence pointing to general stagnation), so that the choice of a constant global average is no more than an innocuous choice of units; (ii) we have documented that changes in the set of underlying data sources on average contributes only minimally to changes over time in countries' scores on the aggregate WGI, and that the majority of cross-country comparisons using the aggregate WGI are based on a substantial number of common data sources; and (iii) we view the presence of explicit margins of error in the WGI as an important advantage of these indicators, serving as a useful antidote to superficial comparisons of country ranks or country performance over time that are often made with other governance indicators. Nevertheless, […] a substantial fraction of cross-country and over-time comparisons using the WGI do result in statistically significant differences, suggesting that the WGI are in fact usefully informative.

20. 2. Biases in Expert Assessments Several critics have alleged biases of various sorts in the data sources underlying the WGI, including an excessive emphasis on business-friendly regulation on the part of some data providers; ideological biases such as a bias against left-wing governments on the part of some data providers; and "halo effects“ whereby countries with good economic performance receive better-than-warranted governance scores. Providing empirical evidence in support of such biases is much more difficult, and in our view has not yet been done convincingly.

21. 3. Correlated Perception Errors. Several critics have suggested that expert assessments make similar errors when assessing the same country, leading to correlations in the perception errors across various expert assessments. While this is plausible, there is little convincing empirical evidence in support of it, and […] we have reviewed some of our own empirical work which suggests that these biases are quantitatively unimportant. A related concern is that correlated perception errors will lead to an over-weighting of such sources in the aggregate WGI, since the WGI weights individual data sources by estimates of their precision, which in turn are based on the 42 observed inter-correlation among sources […]. Given the at best modest evidence of correlated perceptions errors, this is unlikely to be quantitatively important. Further, we have also documented that the country rankings on the WGI are highly robust to alternative weighting schemes.

22. 4. Definitional Issues Some critics have taken issue with our definitions of governance, and thus the assignment of individual governance indicators to the six aggregate WGI. As we have discussed earlier, there is no sharp definitional consensus in the area of measuring governance, and so there cannot be "right" or "wrong" definitions, and corresponding measures, of governance. Nevertheless, most reasonable definitions of governance cover similar broad areas, and aggregate indicators capturing these broad areas are likely to be similar. Moreover, since virtually all of the individual indicators underlying the WGI are publicly available through the WGI website, researchers can easily construct alternative indicators corresponding to their preferred notions of governance.

23. 5. Reliance on "Subjective" Data Various critics have argued that the perceptions-based data on which the WGI are based do no more than reflect vague and generic perceptions rather than specific objective realities, and that "specific, objective, and actionable" measures of governance are needed to guide policymakers and to make progress in governance reforms. We have already discussed at length in this survey how virtually all governance indicators necessarily involve some element of subjectivity; how perceptions-based data on their own are extremely valuable in that they capture the views of relevant stakeholders who act on these views; and that the links from specific changes to policy rules are very difficult to link to changes in outcomes of interest, and so it is difficult to identify indicators that are "actionworthy" as opposed to merely being "actionable".

24. The Bertelsmann Transformation Index http://www.bertelsmann-transformation-index.de/46.0.html?&L=1 does not include: • the US • Canada • Western Europe • Australia • New Zealand • Japan i.e. countries that have achieved a “fully consodidated democracy and market economy“

25. What is the Bertelsmann Transformation Index? Throughout the world, democracy and a market economy have become increasingly powerful models for sustainable societies. Successful processes of reform can be observed in every region of the world. There are, however, no guarantees of success; many countries undergoing transformation face stagnation and power struggles or violence and even state failure. Good governance is pivotal to reform policies that work. What are the key decisions? What are the lessons to be learned from past experience? What strategies are likely to succeed? Under which conditions? The Bertelsmann Transformation Index 2008 puts development and transformation policies to the test. Advocating reforms targeting the goal of a constitutional democracy and socially responsible market economy, the BTI provides the framework for an exchange of best practices among agents of reform. Within this framework, the BTI publishes two rankings, the Status Index and the Management Index, both of which are based on in-depth assessments of 124 countries. The Status Index ranks the countries according to their state of democracy and market economy, the Management Index ranks them according to their leadership’s management performance. Distributed among the dimensions democracy, market economy and management, a total of 17 criteria are subdivided into 49 questions. The BTI 2008 includes an additional set of questions on Gender Management for a separate study. BTI countries are selected according to the following criteria: they have yet to achieve a fully consolidated democracy and market economy, have populations of more than two million (excepting four states chosen as particularly interesting cases), and are recognized as sovereign states. The Bertelsmann Transformation Index project is jointly managed by the Bertelsmann Stiftung and the Center for Applied Policy Research. More information is available at www.bertelsmann-transformation-index.de.

26. “The paper analyzes conditions and options to improve governance capacity, i.e. the ability of a political leadership to implement reform policies aimed at democracy and market economy. It discusses how environmental conditions of policy-making, the configuration of the political system and the organization of executive authority impact upon governance capacity. Summarizing the body of research on these impacts, a two-tiered strategy is suggested, focusing both on qualifying the political leadership and on creating appropriate constraints that enable better governance. Reformers can increase their commitment to democracy and market economy by [1] imposing limits to their authority that facilitate a procedural legitimation of policies and support a self-commitment of the leadership. An effective use of resources may be ensured by [2] rules reducing the flexibility of the executive in using the resources. The quality of political management can be improved by [3] enhancing the status of expert knowledge and professional rationality criteria at the expense of political discretion. Consensus and participation requirements constrain the technocratic habits of political leadership but [4] reinforce the credibility and inclusiveness of consensus-building. A partnership taken seriously by governments and their foreign supporters underpins effective policy ownership.” from: Brusis, Martin 2003. Devoloping Governance Capacity. A Review of Causes and Effects. Strategy Paper for the Transformation Thinkers Conference; Berlin 30.11. – 5.12. 2003 (in download area)