Alan Gelb World Bank

1. Measurement and Use of Governance IndicatorsIntroductory Remarks for Seminar on “Empirics of Governance”May 1-2, 2008 Alan Gelb World Bank

2. Context for Seminar • Part of the overall work on the governance and anti-corruption agenda by the Bank, which is increasing its work and engagement in this area • As we get more involved in supporting governance reform it is natural to consider how to design reforms and to measure progress and the impact of reforms • There is an active research agenda on the issues of measurement of governance and the links between governance and growth and development outcomes. It is important that the Bank stays connected to and learns from the knowledge coming out of this research

3. Two stages of seminar • Day 1: focus issues of measurement, methodology and use in research and policy • Day 2: focus on use of indicators in practice

4. Four Types of Governance Indicators • Broad expert-based indicators • Specific/actionable indicators • Survey-based indicators • Aggregate indicators

5. Day 1 Likely Issues for Discussion…. • Soundness of the conceptual basis of indicators? • Merits and limits of measuring “rules/institutions? vs. outcomes? • Measuring “formal rules” vs “actual rules”? • Precision of indicators? • How important is the distinction between subjective vs objective indicators?

6. …Likely issues (continued) • How robust are the indicators for use for policy reform or to monitor progress? • State of knowledge about the links between changes in some dimension of governance and development outcomes? • Aggregation over various components of governance? • Aggregation across sources of information?

7. Day 2 Implications for Use in Practice Two main uses: • Use to design and monitor reforms---mostly specific rules-based indicators • Use to assess overall quality of governance and monitor progress over time—mostly outcome-based indicators

8. How Are Indicators Used in the Bank? • Resource allocation • Policy advice and monitoring at country level • Monitoring of Progress in Operations • Research

9. Central Question is How to Use the Right Indicator for the Right Job • Different types of indicators are complementary. Varied uses of governance indicators require a mix. • Important to use the right indicator for the job • CPIA for Bank resource allocation • Specific, actionable indicators to inform and monitor operational work at country level—supplemented by detailed country diagnostics • Cross-country indicators for research • Broad indicators for broad governance outcomes and “reality check” on Bank views • Specific indicators for specific governance outcomes • Need to avoid artificial and misleading distinctions • Aggregate vs. disaggregated indicators: useful for different purposes, not an either/or choice • Subjective vs. objective indicators: subjectivity/objectivity a matter of degree as measuring governance is complex and requires some judgment

10. How to Achieve this in a Context of Imperfect Knowledge ? Central question is: How should the answer to the questions about use of GI take into account the balance between • the need to make progress in operational work while at the same time • recognizing the tentative and often weak nature of the results and the limitations on available data?

11. A Final Word Hopefully this seminar will help us also develop an agenda going forward for: • Measurement of governance • Research on the links between governance and development outcomes • Best use of governance of indicators by practitioners