Name: AAKASH KUMAR

REG NO: 04092013122

DATE: 01/04/2024
ASSIGNMENT No: 01
COURSE: INSTITUTION AND DEVELOPMENT
Paper: Governance Matters VIII: Aggregate and Individual Governance Indicators
1996-2008
Authors: Daniel Kaufmann, Brookings Institution, Aart Kraay and Massimo Mastruzzi, The
World Bank. The World Bank, Development Research Group, June 2009,WP 4978
Overview : This paper examines various aspects of governance across different countries during
the years 1996 to 2008, utilizing both aggregate and individual governance indicators to assess
governance performance globally.

Qno1: What are the main objectives of the paper?

Ans: The paper was about the Worldwide Governance Indicators (WGI) research project, which
evaluates governance across Worldwide and territories. The paper is based on six dimensions of
governance i.e.

i) Voice and Accountability

ii) Political Stability and Absence of Violence/Terrorism
iii) Government Effectiveness
iv) Regulatory Quality
v) Rule of Law
vi) Control of Corruption.

They have used 35 data sources to obtain the representative values of these indicators,
Representing perspectives from government, private sector, NGOs, and surveys of citizens
and firms worldwide. The authors emphasize the inclusion of margins of error to account for
measurement difficulties and argue that despite these challenges, the WGI allows for
meaningful cross-country comparisons and progress monitoring.

Qno2: What methodology did the authors use to collect and analyze the data?

Ans: The author used the Unobserved Components Model (UCM) as the statistical framework
for the Worldwide Governance Indicators (WGI). This model aims to extract a robust estimate of
governance from imperfect signals provided by various data sources. They distinguished
between "representative" and "non-representative" indicators based on their coverage of
countries and treated them differently during the estimation process. Parameters such as α, β, and
σ were estimated for each indicator using data collected from surveys, and these estimates were
incorporated into the UCM expressions. Additionally, the authors rescaled the aggregate
governance indicators to ensure consistency in interpretation by setting the mean to zero and the
standard deviation to one.

Qno3: Are there any limitations or biases in the methodology that should be considered?

Ans: As we have taken a huge sample and studied 212 countries, we are stuck on some
limitations and the chance of biases has arrived. Some of them are given below.
Selection Bias: The classification of indicators into "representative" and "non-representative"
categories based on country coverage may introduce selection bias. This distinction could affect
the generalizability of results, as it relies on assumptions about the similarity of governance
distributions across countries.

Data Availability: Reliance on data availability from various sources introduces the risk of
inconsistent collection or updates for different countries. Disparities in data quality and coverage
may bias the estimation of governance indicators.

Assumptions of the UCM: The Unobserved Components Model (UCM) makes assumptions
about the distribution of unobserved governance levels and error terms, such as normality and
zero means. Departures from these assumptions could compromise the accuracy of estimates.

Rescaling Techniques: Although rescaling aggregate governance indicators is necessary for

comparability, the selection of rescaling methods may introduce biases if not appropriately
applied or if underlying assumptions are violated.

Changes in Sample Composition: Adjusting for changes in the sample of countries over time
may introduce biases if newly added countries significantly differ in governance performance
from those in the original sample. Assumptions about the relative performance of new countries
could impact trend interpretation.

Global Governance Trends: The methodology assumes no significant trends in global averages
of governance in the underlying indicators. If actual trends exist, the methodology may not fully
capture these changes.

Model Complexity: The UCM and rescaling techniques are based on specific modeling
assumptions and simplifications. The complexity of the model and assumptions made may
introduce biases if governance dynamics are more nuanced.

Qno4: What data sources were utilized in the study?

Ans: The study classified surveys into two categories: representative and non-representative
indicators. Representative surveys cover countries with governance distributions likely similar to
the global average, including both developed and developing nations. Non-representative surveys
focus on specific regions or income levels, such as transition economies or Latin American
countries. Additionally, the study may have utilized other data sources like official reports,
expert opinions, and governance assessments. By incorporating data from both representative
and non-representative surveys, the study aimed to estimate governance indicators for each
country and analyze trends over time. This approach allowed for a comprehensive evaluation of
governance levels across a diverse set of countries and regions.
Qno5: What variables were considered in measuring governance?

Ans: The study examined various variables to measure governance, focusing on estimating
indicators for different countries. These variables encompass multiple dimensions of governance
performance:

Voice and Accountability: This assesses citizens' ability to participate in selecting their
government and the freedom of expression, association, and media within a country.

Political Stability and Absence of Violence: This measures perceptions regarding the likelihood
of political instability, violence, terrorism, and armed conflict.

Government Effectiveness: This evaluates the quality of public services, the civil service's
quality, and its independence from political pressures.

Regulatory Quality: This assesses the government's ability to formulate and implement policies
and regulations that foster private sector development.

Rule of Law: This measures confidence in and adherence to societal rules, including the quality
of contract enforcement, property rights, the police, and the courts.

Control of Corruption: This evaluates the extent to which public power is used for private gain,
encompassing both petty and grand forms of corruption.

Qno6: What are the main findings of the paper regarding global governance trends during
period of study?

Ans: The main findings of the paper regarding global governance trends during the study period
can be summarized as follows:

 The study did not find strong evidence of significant trends in world averages of
governance in the underlying indicators.
 Changes over time in countries' relative positions on the Worldwide Governance
Indicators (WGI) can be interpreted as changes in their absolute governance scores,
assuming no changes in global averages of governance.
 The methodology used in the study aimed to maintain the comparability of countries'
relative positions on the governance indicators over time, despite the expansion of the
sample of countries covered by the indicators.
 The study addressed the issue of changes in the sample composition of countries covered
by the governance indicators by implementing rescaling techniques to adjust for
variations in governance performance among countries added in later years relative to the
original sample.
  The rescaling of the aggregate governance indicators aimed to ensure that the estimates
for different years had zero mean and standard deviation of one across countries,
allowing for consistent interpretation of governance scores over time.
 These findings highlight the efforts made in the study to maintain the consistency and
comparability of governance indicators over time, despite changes in the composition of
countries covered and potential variations in governance performance among different
regions.

Qno7: What are the weaknesses or limitations of the study? Are there any notable issues
that deserve special attention?

Ans: The study on governance indicators has some weaknesses:

 Selection Bias: Classifying indicators as "representative" or "non-representative" may

introduce bias.
 Data Availability: Inconsistent data quality and coverage across countries could bias
estimations.
 Assumptions of the UCM: Simplified assumptions about governance dynamics may lead
to inaccuracies.
 Rescaling Techniques: Rescaling methods may introduce bias if not applied correctly.
 Changes in Sample Composition: Adjusting for changes in country samples over time
could introduce bias.
 Global Governance Trends: Assuming no significant trends may overlook actual changes.
 Model Complexity: The model may not capture nuanced governance dynamics
accurately.
 Interpretation of Trends: Simplified interpretations may oversimplify governance
performance changes.

Qno8: What factors may explain the differences in governance performance among
countries?

Ans: Key factors influencing governance performance:

 Political Stability and Conflict: Stability and consistent governance are challenged by
political unrest and conflict.
 Institutional Quality: Strong institutions, including rule of law and control of corruption,
are pivotal for effective governance.
 Economic Development: Economic status and inequality intersect with governance
outcomes.
 Corruption Levels: Prevalence of corruption and anti-corruption efforts affect
governance.
 Civil Society Engagement: Active civil society and media enhance governance
transparency.
 Rule of Law: Protection of rights and independent judiciary are crucial for good
governance.
  Government Accountability: Transparency, fair elections, and oversight mechanisms
ensure government accountability.

 Social Cohesion: Inclusivity, human rights, and social unity contribute to stable
governance.
 Education and Human Capital: Education levels and skills development impact
governance by empowering citizens and enhancing public administration.
 Geopolitical Factors: International relations, trade, and global frameworks influence
governance.
 Understanding these factors aids in strengthening governance and fostering sustainable
development.

Qno9: Based on the findings of the paper, what are some potential areas for future
research?

Ans: Longitudinal Analysis: Tracking governance changes over time to understand factors
driving improvements or declines.

Comparative Studies: Analyzing governance across regions, incomes, and political systems to
identify trends and best practices.

Qualitative Research: Complementing quantitative data with qualitative insights to understand

contextual factors.

Subnational Governance: Exploring governance variations within countries to understand local

dynamics.

Governance and Sustainable Development: Investigating how governance quality impacts

sustainable development outcomes.

Gender and Governance: Assessing how gender dynamics influence governance effectiveness.

Innovative Governance Models: Studying new governance approaches like participatory and
digital governance.

Governance in Crisis: Analyzing governance in conflict or post-conflict scenarios for rebuilding

insights.

Governance and Technology: Exploring technology's role in transforming governance processes.

Global Governance Trends: Monitoring global trends and their impact on governance systems.