Success or Not: Measures of Government Effectiveness

While empirical studies have found that the quality of governance has an important impact on economic growth, measuring governance quality and performance remains a major challenge (Kaufmann and Kraay 2003). The most comprehensive and reliable source of information on government performance is the Worldwide Governance Indicators (WGI), which were first released in 1999 by Kaufman, Kraay, and Zoido-Lobaton (1999a and 1999b). The most recently published survey data (Kaufman, Kraay, and Mastruzzi [KKM] 2007) updates indicators to 2006, revises earlier estimates to take account of new information, and expands the number of countries examined (now 212). Consistent and revised data are available for 1996, 1998, and 2000–2006.

Drawing together information from over 33 data sources provided by 30 different organizations, the WGI measure governance performance in six separate dimensions. The scores are distributed normally around a mean of zero with a standard deviation of one. This means that virtually all scores lie in a range from -2.5 (poor) to +2.5 (good), with larger values signifying a better score. Estimates of the accuracy of the indicators are also available and these suggest that accuracy has improved over the years.

Three measures of performance for selected Asian economies for 1996, 1998, 2000, and 2002–2006 are examined. Figure 5 [ PDF 23.4KB | 1 page ] shows the change in regulatory quality for this period. This indicator measures “the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development” (KKM 2007: 4).

Almost across the board, regulatory quality in the region has gone down since reported in 1996. In that year, only Lao PDR and Viet Nam reported negative measures. By 2006, only Japan and Thailand had shown an improvement in quality measures, while Malaysia remained relatively consistent. These findings are supported by the observation that these countries, i.e., Thailand and Malaysia, have achieved some of the most significant growth in private sector participation in infrastructure in the region. Indeed between 2003 and 2005, Malaysia experienced the highest private sector investment in infrastructure, expressed as a percentage of GDP, than any other country examined (WB PPI Database 2007). On the other hand, the Philippines and Indonesia, cited as having gone the furthest in the decentralization process, have shown a decrease in regulatory quality over time. As a percentage of GDP, these two economies experienced the lowest amount of private sector infrastructure investment.

The next measure presented is government effectiveness (Figure 6 [ PDF 27.3KB | 1 page ]). This indicator measures “the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies” (KKM 2007: 3).

Once again, Japan, Malaysia, and Thailand stand out as the only regions to show improvement (or even to show a positive measure at all) between 1996 and 2006. For this indicator, however, Thailand remained relatively stable, while measures of Malaysian government effectiveness improved. Perhaps this is a reflection of the downside of the decentralization process. As decision-making becomes fragmented and skills are stretched, government effectiveness declines. Also, in the case of infrastructure, local political pressure may result in misguided investment decisions and intra-regional projects may face a lack of commitment given the potential dilution of political support across jurisdictions.

The final measure examined in the study was voice and accountability (Figure 7 [ PDF 27.3KB | 1 page ]). This shows 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” (KKM 2007: 3). One would expect this measure to have improved the most in the decentralized countries. Indeed, a key argument for decentralization is that it improves participation in the governmental process.

Once again, performance in the region was not encouraging. In this case, however, the standout was India, along with Japan. These were the only two countries with consistently positive values for this measure. Indonesia’s performance also improved, whereas the Philippines actually showed a deterioration in its measured performance.

While the standard error on reported measures of WGI have declined over time, that is not to say the measures are not without their faults. In 1996, the average of the standard error was 0.33. In 2006, the standard error ranged from 0.20–0.22 for the sample as a whole, and between 0.15 and 0.20 for the countries presented here. While these figures represent an improvement, they are still large given the base values. Finally, on balance, the WGI measures suggest deterioration, both absolutely, and in terms of comparison with other countries.

Download this Paper [ PDF 126.4KB| 19 pages ].

Comment(s)

There are [0] comment(s) for this entry. Post a comment.