Governance Indicators: Where Are We, Where Should We Be Going?

Abstract

Progress in measuring governance is assessed using a simple framework that distinguishes between indicators that measure formal rules and indicators that measure the practical application or outcomes of these rules.The analysis calls attention to the strengths and weaknesses of both types of indicators as well as the complementarities between them.It distinguishes between the views of experts and the results of surveys and assesses the merits of aggregate as opposed to individual governance indicators.Some simple principles are identified to guide the use and refinement of existing governance indicators and the development of future indicators.These include transparently disclosing and accounting for the margins of error in all indicators, drawing from a diversity of indicators and exploiting complementarities among them, submitting all indicators to rigorous public and academic scrutiny, and being realistic in expectations of future indicators.JEL codes: H1, O17 Not everything that can be counted counts, and not everything that counts can be counted. -Albert EinsteinMost scholars, policymakers, aid donors, and aid recipients recognize that good governance is a fundamental ingredient of sustained economic development.This growing understanding, initially informed by a very limited set of empirical measures of governance, has spurred intense interest in developing more refined, nuanced, and policy-relevant indicators of governance.This article reviews progress in measuring governance, emphasizing empirical measures explicitly designed to be comparable across countries and in most cases over time.The goal is to provide a structure for thinking about the strengths and weaknesses of different types of governance indicators that can inform both the use of existing indicators and ongoing efforts to improve them and develop new ones. 1 The first section of this article reviews definitions of governance.Although there are many broad definitions of governance, the degree of definitional disagreement