government matters.pdf
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P O L I C Y R E S E A R C H W O R K I N G P A P E R
Governance Matters
Daniel Kaufmann
Aart Kraay Pablo Zoido-Lobatón
The World Bank
Development Research Group
Macroeconomics and Growth
andWorld Bank Institute
Governance, Regulation and Finance
October 1999
2 196
Six new aggregate measures
capturing various
dimensions of governance
provide new evidence of a
strong causal relationshipfrom better governance to
better development
outcomes.
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P O L I C Y R E S E A R C H W O R K I N G P A P E R 2196
Summary findings
In a cross-section of more than 150 countries,
Kaufmann, Kraay, and Zoido-Lobatón provide new
empirical evidence of a strong causal relationship from
better governance to better development outcomes.
They base their analysis on a new database containing
more than 300 governance indicators compiled from a
variety of sources. They provide a detailed description
of each of these indicators and sources. Using an
unobserved components methodology (described in
This paper—a joint product of Macroeconomics and Growth, Development Research Group; and Governance, Regulation,and Finance, World Bank Institute—is part of a larger effort in the Bank to study the causes and consequences of governance
for development. Copies of this paper are available free from the World Bank, 1818 H Street, N.W., Washington, DC 20433.Please contact Diane Bouvet, Room J3-273, telephone 202-473-5818, fax 202-334-8350, email dbouvet@worldbank.org. Thispaper is also available on the Web at http://www.worldbank.org/wbi/governance/working_papers.htm. The authors may becontacted at dkaufmann@worldbank.org, akraay@worldbank.org, or pzoidolobaton@worldbank.org. October 1999. (60 pages)
Produced by the Policy Research Dissemination Center
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the
names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.
the companion paper by Kaufmann, Kraay, and Zoido-
Lobatón, “Aggregating Governance Indicators,” Policy
Research Working Paper 2195), they then contruct six
aggregate indicators corresponding to six basic
governance concepts: voice and accountability, political
instability and violence, government effectiveness,
regulatory burden, rule of law, and graft. As measured
by these indicators, governance matters for
development outcomes.
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