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Corruption in transition: reflections & implications from governance empirics
Daniel Kaufmann, Brookings Institution
Presentation at the opening plenary session on Measurement & Consequences of Corruption at the Economic Research Forum (ERF) 18th Annual
Conference, Cairo, Egypt, March 25th, 2012
Issues in brief
• Corruption: not subject to measurement?
• Is it all-pervasive in emerging economies?
• The crucial determinant of under-development?
• Fighting corruption by fighting corruption?
• Democratic transitions lead to control of corruption?
• Does International Donor Assistance help
democratic transitions & anti-corruption?
• Insidious form of political corruption: State Capture
Rules Outcomes
Broad Specific Broad Specific
Experts Lawyers DB
Commercial Risk Rating Agencies
EIU, PRS, WMO, PRC
Non-Governmental Organizations
GII FRH/CCR GII
Governments & Multilaterals AfDB, ASD, CPIA IFD
Academics IPD
Survey Respondents Firms GCS, WCY,
WBES, ES, BEEPS
Individuals AFR, LBO, GWP, VAB WVS, GCB
Aggregate Indicators Combining Respondents
TI, WGI, IIAG
A Taxonomy of Corruption Indicators: Who (reports data) & What Type? -- rules vs outcomes-based
Whose Opinion? About What?
Measurement is possible: corruption and beyond, with caution
• Many measures of corruption exist today
• Different characteristics, virtues and challenges
• Advantages and Disadvantages of aggregating and constructing composites
• The WGI in brief
WGI: The Six Indicators of Governance Governance: Set of institutions by which authority
in a country is exercised – specifically: • Political cluster: the process by which those in authority
are selected and replaced 1. VOICE AND DEMOCRATIC ACCOUNTABILITY
2. POLITICAL STABILITY & ABSENCE OF VIOLENCE/TERRORISM
• Economic cluster: the capacity of government to implement policies and provide public services 3. GOVERNMENT EFFECTIVENESS
4. REGULATORY QUALITY
• Institutional cluster, the respect for institutions governing interactions among citizens & the state 5. RULE OF LAW
6. CONTROL OF CORRUPTION 6
Main Features of the WGI • Data on six dimensions of governance covering 213 countries
over the period 1996-2010
• Synthesis of hundreds of underlying indicators taken from over 30 different organizations & data sources
• Aggregate and individual indicators interactively available at www.govindicators.org, large database
• Unobserved Component Model (UCM): for aggregation
• Result of longstanding research project, featuring the “Governance Matters” series, plus new analytical report, by D. Kaufmann, A. Kraay & M. Mastruzzi: “Worldwide Governance Indicators: Methodology & Analytical Issues”
• Transparency & precision about imprecision: full disclosure of limitations of data: the WGI quantify this imprecision w/ “margins of error” (likely range of governance scores for each country)
7
Individual sources for constructing the WGI • Cross-Country Surveys of Firms: Global Competitiveness
Survey, World Competitiveness Yearbook, BEEPS
• Cross-Country Surveys of Individuals: Gallup World Poll, Global Corruption Barometer, Latinobarometro, Afrobarometer
• Expert Assessments from Commercial Risk Rating Agencies: Global Insight, Political Risk Services, Economist Intelligence Unit, IJET Travel, Asia Risk Consultancy
• Expert Assessments from NGOs, Think Tanks: Reporters Without Borders, Heritage Foundation, Freedom House, Bertelsmann Foundation, Amnesty International, IREEP, IREX, Global Integrity, Binghamton University, International Budget Project
• Expert Assessments from Governments, Multilaterals: World Bank CPIA, EBRD, AFDB, ADB, State Dept., IFAD 8
-2.5
-1.5
-0.5
0.5
1.5
2.5
SOM
ALI
A
ZIM
BA
BW
E A
NG
OLA
IR
AQ
LI
BYA
V
ENEZ
UEL
A
RU
SSIA
SY
RIA
IR
AN
EC
UA
DO
R
DO
MIN
ICA
N R
EP.
PAR
AG
UA
Y
IND
ON
ESIA
C
HIN
A
EGY
PT
IND
IA
BO
LIV
IA
AR
GEN
TIN
A
ALB
AN
IA
CO
LOM
BIA
M
EXIC
O
MO
RO
CC
O
TUN
ISIA
G
REE
CE
TUR
KEY
B
RA
ZIL
SOU
TH A
FRIC
A
SAU
DI A
RA
BIA
S.
KO
REA
ES
TON
IA
BO
TSW
AN
A
UA
E U
SA
UK
C
HIL
E Q
ATA
R
DEN
MA
RK
Source: “WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org; Dark red indicates countries in the bottom 10th percenti8le rank; light red between 10th and 25th percentile rank; orange between 25th and 50th; yellow between 50th and 75th; light green between 75th and 90th and Dark green between 90th and 100th percentile (exemplary governance)
Governance Level
Margin of Error
9
Good Corruption Control
Control of Corruption in Select Countries, 2010
Source: WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org 90th-100th percentile
75th-90th percentile
50th-75th percentile
25h-50th percentile
10th-25th percentile
0th-10th percentile 10
Figure 3. Control of Corruption in the Arab world, 2010
Does Governance & Corruption Matter?
12
The 300% Development Dividend From Improving Governance & Controlling Corruption
High Corruption Medium Corruption Low Corruption
$300
$3,000
$30,000
Data Source for calculations: KK 2004. Y-axis measures predicted GDP per capita on the basis of Instrumental Variable (IV) results for each of the 3 categories. Estimations based on various authors’ studies, including Kaufmann and Kraay.
Control of Corruption and WEF GCR Competitiveness, 2010
Source: EOS firm survey, WEF Global Competitiveness Survey 2011 & '“Worldwide Governance Indicators,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org
BRA
CHL
CRI
DOM
SLV
JAM
0
20
40
60
80
100
0 20 40 60 80 100
Glo
bal
Co
mp
etit
ive
ne
ss In
dex
, 20
11
Control of Corruption, 2010
r = 0.79
High
High Low
Low
Corruption: fundamental driver, symptom, or proximate cause?
16
Voice and Accountability
Source: WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org.
90th-100th percentile
75th-90th percentile
50th-75th percentile
25h-50th percentile
10th-25th percentile
0th-10th percentile
18
Freedom of the Press associated w/ better Control of Corruption (& civil liberties more generally is associated with better performance of World Bank-funded
projects – see WBER article 1997)
Source: WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org. & Freedom House, “Press Freedom”, 2011. Terciles according the Press Freedom criteria – free press (rating of 30 or below), partly free (ratings between 30 and 60) and not free (rating above 60).
-1.0
-0.5
0.0
0.5
1.0
Not Free Partly Free Free
WG
I Co
ntr
ol o
f C
orr
up
tio
n, 2
01
0
Good
Effect of Media Freedom on Control of Corruption (when Low Rule of Law)
-2.0
-1.0
0.0
1.0
2.0
Low Press Freedom/Low Rule of Law High Press Freedom/Low Rule of Law
Sources: Kaufmann D., A. Kraay, M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues , September 2010; Freedom House, Freedom of the Press, 2005-2009 editions
Effect of Media Freedom and Rule of Law on Control of Corruption
-2.0
-1.0
0.0
1.0
2.0
Low Press Freedom/Low Rule
of Law
High Press Freedom/Low Rule
of Law
Low Press Freedom/Hight Rule
of Law
High Press Freedom/High Rule
of Law
Sources: Kaufmann D., A. Kraay, M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues , September 2010; Freedom House, Freedom of the Press, 2005-2009 editions
Democratic Transitions, and Corruption
‘Net Democracy’ Scores Pre-Transition & during Initial Transition Average Polity Scores for 91 countries
-10
-5
0
5
10
T-5
T-4
T-3
T-2
T-1
T
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010. In T-5 the sample consists of 92 countries.
Transition Period
‘Net Democracy’ Scores Pre-, During & Post-Transition Average Polity Scores for 77 countries
-10
-5
0
5
10
T-5
T-4
T-3
T-2
T-1
T
T+1
T+2
T+3
T+4
T+5
T+6
T+7
T+8
T+9
T+1
0
T+1
1
T+1
2
T+1
3
T+1
4
T+1
5
T+1
6
T+1
7
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010. In T-5 the sample consists of 92 countries.
Transition Period
‘Net Democracy’ Scores for Transitioning Countries, by Democratic Performance Groups (Polity)
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010. There are 44 countries in the improving/performing category; 31 in the stagnating category and 17 in the deteriorating category
-10
-5
0
5
10
T-5
T-4
T-3
T-2
T-1
T
T+1
T+2
T+3
T+4
T+5
T+6
T+7
T+8
T+9
T+1
0
T+1
1
T+1
2
T+1
3
T+1
4
T+1
5
T+1
6
T+1
7
Improving/ Performing (44)
Stagnating (31)
Deteriorating (17)
T
T+7
T+15
Transition Period
Institutional Performance: Select Countries from Improving/Performing Group, 1985-2010
-10
-5
0
5
10
1985 1990 1995 2000 2005 2010
Chile
Slovenia
Liberia
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010.
Institutional Performance: Select Countries from Stagnating Group, 1985-2010
-10
-5
0
5
10
1985 1990 1995 2000 2005 2010
Russia
Ethiopia
Tanzania
Togo
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010.
Institutional Performance: Select Countries from Deteriorating Group, 1985-2010
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010.
-10
-5
0
5
10
1985 1990 1995 2000 2005 2010
Venezuela
Congo (Brzz)
Iran
How Well Do the ‘Democratizing’ Transition do in Rule of Law & Control of Corruption (WGI 2010, by Polity Performance Category)
0
20
40
60
80
100
Deteriorating Stagnating Improving/Performing
Rule of Law Control of Corruption
Polity Group::
Sources: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010; WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org
Probability of (Relatively) Successful Control of Corruption performance in 2010, by Polity-Democratic Performance Category
0%
20%
40%
60%
80%
100%
Deteriorating Stagnating Improving/Performing
Control of Corruption
Sources: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010; WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org
The International Community, Aid Effectiveness, and Transition
Voice & Accountability in the Arab World, 2010
Source: WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org 90th-100th percentile
75th-90th percentile
50th-75th percentile
25h-50th percentile
10th-25th percentile
0th-10th percentile
0 10 20 30 40 50 60 70 80 90 100
LIBYA
SYRIA
SAUDI ARABIA
IRAN
TUNISIA
YEMEN
EGYPT
DJIBOUTI
OMAN
ALGERIA
QATAR
UAE
JORDAN
MOROCCO
KUWAIT
LEBANON
32
Voice & Accountability in Arab World: 2000 (bottom bar) & 2010 (top bar)
Source: WGI: A Summary of Data, Methodology and Analytical Issues,” by D. Kaufmann, A.Kraay and M. Mastruzzi, October 2011 – www.govindicators.org 90th-100th percentile
75th-90th percentile
50th-75th percentile
25h-50th percentile
10th-25th percentile
0th-10th percentile
0 10 20 30 40 50 60 70 80 90 100
LIBYA
SYRIA
SAUDI ARABIA
IRAN
TUNISIA
YEMEN
EGYPT
DJIBOUTI
OMAN
ALGERIA
QATAR
UAE
JORDAN
MOROCCO
KUWAIT
LEBANON
33
0
20
40
60
80
100
0
2
4
6
8
10
2000 2002 2003 2004 2005 2006 2007 2008 2009 2010
WG
I VA
(P
erc
en
tile
Ran
k)
Ne
t O
DA
(B
illio
ns
USD
)
Arab World ODA (excl. Iraq) Arab World V&A
Figure 1. Evolution of Development Assistance versus Voice and Democratic Accountability in the Arab region, 2000-2010
Note: WGI = Worldwide Governance Indicators; V&A: Voice and (democratic) Accountability; ODA = official development assistance. Iraq is excluded, representing a special case. Sources: D. Kaufmann, A. Kray and M. Mastruzzi, “The Worldwide Governance Indicators: Methodology and Analytical Issues,” 2011, at www.govindicators.org; Organization for Economic Cooperation and Development, Development Assistance Committee Database.
Share of Aid to Recipients, By Recipient Category (1960-2010)
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010; OECD, DAC, 2012
0%
20%
40%
60%
80%
100%
Fully Democratic Aid
Stagnating-Democratic Aid
Non-Democratic Aid
35
Aid per Capita To Transitioning Countries, by Performance Group (3-Year Moving Averages)
Source: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2010; OECD, DAC, 2012
0
5
10
15
20
25
30
t-5
t-
4
t-3
t-
2
t-1
t t+
1
t+2
t+
3
t+4
t+
5
t+6
t+
7
t+8
t+
9
t+1
0
t+1
1
t+1
2
t+1
3
t+1
4
t+1
5
t+1
6
t+1
7
t+1
8
Aid
pe
r C
apit
a (U
SD)
Deteriorating
Stagnating
Improving/ Progressing
No Transition (All Years)
No Transition (2010)
36
State Capture & Legal Corruption: A Worldwide Challenge
Bribery vs. ‘Legal Corruption’ (& soft Capture), 2004
0
20
40
60
80
Corporate Bribery Corporate "Legal Corruption"
% F
irm
s re
po
rt 'c
orr
up
tio
n'
Nordic Countries
G-7
East Asia 'Tigers' (NICs)
United States
Source: Author’s calculations based on EOS 2004.
% Firms report ‘corruption’
Bribery vs. ‘Legal Corruption’ (& soft Capture), 2004
0
20
40
60
80
Corporate Bribery Corporate "Legal Corruption"
% F
irm
s re
po
rt 'c
orr
up
tio
n'
Nordic Countries
G-7
East Asia 'Tigers' (NICs)
United States
Source: Author’s calculations based on EOS 2004.
% Firms report ‘corruption’
40
Six Implications - as contributions to debate
1. Governance can be measured: triangulation; transparency
about imprecision, & interpretative caution
2. Governance and Corruption Matters
3. Aid strategies ought to support democratic governance
4. Transitions can succeed or fail, and controlling corruption is
key, and difficult
5. But one does not ‘fight corruption by fighting corruption’:
voice & democratic accountability, gender rights,
transparency, rule of law, procurement systems, etc.
6. State Capture as a form of high level corruption &
misgovernance