Measuring & Monitoring
Governance in Developing
Countries
Stephen Knack
The World Bank
2nd International Roundtable
Marrakesh, Feb. 2004
Governance:
World Bank definition
“Good Governance is epitomized by
predictable, open and enlightened policy
making (that is, transparent processes); a
bureaucracy imbued with a professional
ethos; an executive arm of government
accountable for its actions; and a strong civil
society participating in public affairs; and all
behaving under the rule of law.”
Governance and the MDGs
Governance matters for:
•Poverty reduction (via
investment & growth)
•Education & health outcomes
(via higher incomes and quality
of public service delivery)
Which governance indicator is “best”
depends on the purpose

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Performance v. process
Comparison at point in time across
countries (e.g. for aid allocation)
Measuring progress over time
within individual countries (PRSP)
Measuring progress over time for
groups of countries (Global
monitoring)
Measures used in
early research
Freedom House
•Civil liberties
•Political freedoms
Political violence frequencies
•Coups, attempted coups
•Assassinations, civil wars
•Riots, strikes
Trend in civil liberties (Freedom House)
4.5
4.0
3.5
3.0
All developing
Value
2.5
IDA
2.0
LICUS
1995
1996
YEAR
1997
1998
1999
2000
2001
2002
Political risk ratings
•International Country Risk Guide
•Business International
•Business Environ. Risk Intelligence
ICRG: International Country
Risk Guide

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Corruption in government
Quality of bureaucracy
Law & order tradition (rule of law)
Risk of government repudiation of
contracts
Risk of expropriation
Democratic accountability
Ethnic tensions
Growth & ICRG index (partial plot)
.07
.05
.03
.01
-.01
-.03
-.05
-15
-10
ICRG (residual)
-5
0
5
10
15
Aggregating Governance
Indicators
TI: Corruption Perceptions Index
WBI (Kaufmann/Kraay):
 Voice and accountability
 Political stability
 Government effectiveness
 Regulatory quality
 Rule of Law
 Control of corruption
CPIA: Country Policy &
Institutional Assessment

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Property Rights & Rule-based
governance
Quality of budgetary & financial
management
Efficiency of revenue mobilization
Quality of public administration
Transparency, accountability &
corruption in the public sector
Broad indicators of quality of
governance



Demonstrate importance of
governance for economic outcomes
Help in identifying political & social
factors underlying governance
problems
Indicate countries for which
governance may be most severe
obstacle to growth, effective service
delivery
Need for more specific governance
indicators
At country level:
 Identify areas where reforms
needed
 Monitor progress over time
Research:
 Identify which institutional
arrangements are most
important
 what can be done
Importance of transparency and
replicability of measurement
Country “ownership” often
requires more transparently
constructed and replicable
indicators
Ownership is also influenced by
specificity--governments may
resist indicators that seem
accusatory & do not suggest
particular solutions
Surveys of businesses, public
officials, households

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administrative corruption vs. state
capture (BEEPS/WBES)
corruption, employee morale, credibility
of rules and policies, resource
predictability across agencies (WB
public officials surveys)
quality of service delivery (Bangalore
Report Cards, Barometer surveys)
Assessment of budgeting systems in
HIPCs

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budget formulation: coverage, inclusion
of donor funds, classification system,
multiyear projections
budget execution: internal control,
tracking reliability
budget reporting: regularity of reports,
delays in final audited accounts
“Doing Business”

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Number of procedures, fees, time
required to start a new business
Number of procedures, time
required to collect on a bad debt or
to evict a non-paying tenant
Creditor rights
Employment regulation
Bankruptcy rules
Other “objective” performance
measures
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Tax revenue as share of GDP
Trade tax revenue as share of all
revenue
Budgetary volatility
Revenue source volatility
Survey responses: bribes/revenues,
frequency of power outages,
teacher absences, doctor absences
Cross-National Data on Government
Employment and Wages
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Employment in civil service, health,
education, and police in central and subnational government
Central government wage bill, as share of
government spending and GDP
Average central government wage, relative to
per capita income and wages in
manufacturing, financial services and private
sector
Vertical compression ratio
Corruption & Civil service pay
3
2
1
KKZ Graft index
0
-1
-2
Rsq = 0.0331
0
2
4
6
8
Civil service pay/per capita GDP
10
12
Database on Political
Institutions (DPI)
•
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Coverage: 1975-present for 177
countries
Content: 113 variables on elections &
electoral rules, party composition of
opposition & governing coalitions,
indexes of political stability & checks &
balances
Applications: receptivity to economic
reform, political roots of corruption,
sources of the rule of law, management
of ethnic divisions