What explains the popularity and misuse of the prominent governance indicators produced by the World Bank and others? This article in the International Public Management Journal argues that producing and using a range of more targeted, transparent indicators will benefit all stakeholders. Among hundreds of existing governance indicators, the most popular are perception-based composite indicators, primarily of use to international organisations, donors, investors and the media. These indicators summarise vast amounts of data that exists for a large number of countries, but the drawbacks of relying heavily on them are significant.
The past 15 years have witnessed an explosion of interest in evaluating the quality of governance. A widespread perception held that many market-oriented policy reforms had failed because of governance issues, and so many academics and policy-makers began to stress the role of institution-building in the reform process and in aid allocation.
The metrics currently in widest use are the World Governance Indicators (WGIs) produced since 1996 by Daniel Kaufmann and his team at the World Bank Institute. Similarly prominent are Transparency International’s Corruption Perceptions Index (CPI), the facts-based Doing Business Indicators from the World Bank and the International Finance Corporation, among others. Analysis of such commonly used governance indicators, along with the reasons for their use, indicates that:
- International organisations produce and make use of these indicators to incentivise developing nations to improve governance, to improve their allocation of aid and for other institutional reasons.
- The six WGIs are easily accessible to the general public, and have become vital to the media, academics and policy-makers alike. Available for more than 200 countries, the WGIs summarise data from 30 expert evaluations as well as household and firm surveys.
- A small number of indicators are currently dominant because users do not grasp their limitations, and possible alternatives are not well known.
- With a wide variety of alternatives available (and conceivable), the easiest step at present is for users to seek out governance indicator guides and inventories.
The most widely-used indicators face limitations with respect to comparability over time, transparency and feasibility of implementation. New indicators have emerged, which tend to focus on specific and well-defined aspects of governance and therefore give guidance to developing countries on how to improve their rating. Until a theory of governance is able to guide the construction of meaningful indicators of the overall quality of governance, the development community should focus on such specific and well-defined indicators. Other conclusions include the following:
- Greater reliance on a small set of widely used indicators has led to even greater international acceptance and thus further spread. Media visibility has accelerated the process, blocking the entry of new indicators which might prove more relevant.
- Decision-makers continue to demand summary measurements which can be used across space and over time, increasing the popularity of a select group of indicators.
- There is a growing resistance on the part of developing countries to indicators that are perceived as ‘Western’ and are primarily used by outsiders.
- The new, more specific indicators also have their limitations; since they are transparent, however, their limitations are transparent, reducing the danger of misinterpretation and misuse.
NB: An earlier version of this paper is also available online at: http://www.governance.unimaas.nl
