corruption within a governance frameworksiteresources.worldbank.org/intwbigovantcor/... · 11...
TRANSCRIPT
1
Corruption within a Governance Framework:
Practical Lessons from Empirical Evidence
Daniel Kaufmann, World Bank Institute
www.worldbank.org/wbi/governance
Presentation at the Seminar on ‘Tackling Corruption Worldwide: From 0 to Hero’, St
Hugh’s College, Oxford, March 21st 2004
2
The ‘Prohibition’ Era
1970 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003
WDR on Institutions 1982
JDW “Cancer of Corruption”Speech (10/96)
State in a Changing World (97)
• Public Expenditure, Financial Mgt. & Procurement Reforms
• Diagnostic/Data/ Monitoring Tools
• Administrative & Civil Service Reform
• Civil Society Voice, Accountability, Media & Transparency Mechanisms
• State Capture/Corporate Governance
• Legal/Judicial Reform
Broadening & Mainstreaming
The initial ascent … getting to base camp …
TI CPI (5/95)
Anti-corruption Strategy (97)
Governance Strategy (00)
1st set of firms Debarred from WB (99)
Formalization of INT (01)
Strategic Compact (97)
O.P. Mainstreaming AC in CAS (99)
Governance Pillar - CDF (98)
Internal AC unit created in WB (98)
Gov/A-C Diagnostics start (98)
3
Latvia (anticorruption)
Russia (customs/treasury)
India – Andra Pradesh (power; e-gov); Karnataka (right to info)
Colombia (diagnostics& civil society)
Indonesia(local governance)
Uganda (PRSC; education)
Jordan (civil society)
Explosion of activities: Examples of major programs launched across countries
Pakistan(devolution)
Philippines (transport)
Ghana (PE accountability)
Bolivia: (public admin.)
Albania(public admin.)
Guatemala(diagnostic to
action program)
Tanzania(PSR)
Ethiopia (decentralization)
Cambodia (PE; forestry)
Ukraine (tax admin)
Bangladesh(civil society)
Gabon(water/electricity)
Kyrgyz Republic (governance reform)
4
5
A A ‘‘LiveLive’’ Test:Test:‘‘CultureCulture’’, Information and Incentives:, Information and Incentives:
•• You are approaching your car in the empty and You are approaching your car in the empty and unattended garage late at night unattended garage late at night
•• You see an envelope on the floor, and you pick it upYou see an envelope on the floor, and you pick it up
•• It contains 20 bills of US $100 each. It contains 20 bills of US $100 each.
•• If no possibility that anyone would know: No If no possibility that anyone would know: No cameras, no monitoring, no reportingcameras, no monitoring, no reporting
•• What would you do with such envelope full of What would you do with such envelope full of cash?cash?
6
50% Undecided 33% Report and Return Funds
17% Keep
A. If no possibility that anyone would know:A. If no possibility that anyone would know:You are alone, there is no monitoring, cameras, or possibilityYou are alone, there is no monitoring, cameras, or possibility of of resportingresporting
Option Finder Results: Various Audiences
7
B. If B. If 30%30% probability that information is shared probability that information is shared (e.g. 30% that camera recording info which may be reviewed(e.g. 30% that camera recording info which may be reviewed))
74% Report and Return Funds
22% Undecided
4% Keep
8
Most effective Anticorruption Measures?Responses from Officials and Leaders in 62 countries
20%
30%
40%
50%
60%
70%
80%
90%
Privatizacion Voz ylibertadesciviles
ReformasPublicas
Transparenciapresupuestaria
Economiadesregulada
Liderazgoejemplar
% d
e en
trev
ista
do
s q
ue
dan
un
alto
gra
do
Fuente: D. Kaufmann, ‘Corruption: The Facts’, Foreign Policy, Verano, 1997
Comisiones Anti-corrupcion
9
1. Governance can be measured, monitored, analyzed2. Aggregate and Disaggregated Governance Indicators:
How constructed, interpreted -- & margins of error3. Governance Performance Variations across regions,
countries & dimensions of governance4. Progress on Governance and Anti-Corruption?5. Limits to Generalized Worldwide & Regional Analyses?6. Key Research Findings and Addressing Myths 7. Main Lessons, 1: Over-estimated traditional Legal
and Public Sector Management strategies?8. Main Lessons, 2: Underestimated role of: i) Politics
(and its financing); ii) Private Sector; iii) Transparency and Citizen Voice Mechanisms
Governance Redux: Outlining Key Themes
10
Empirical Approach to Governance
1. ‘Macro’: Worldwide Aggregate Governance Indicators: 200 countries, 6 components, periodic.
2. ‘Mezzo’: Cross-Country Surveys of Enterprises
3. ‘Micro’: Specialized, in-depth, in-country Governance and Institutional Capacity Diagnostics: Includes surveys of: i) user of public services (citizens); ii) firms, and iii) public officials On ‘Aggregate/Macro’ Level first…
11
Governance: A working definition
• Governance is the process and institutions by which authority in a country is exercised:
(1) the process by which governments are selected, held accountable, monitored, and replaced;
(2) the capacity of gov’t to manage resources and provide services efficiently, and to formulate and implement sound policies and regulations; and,
(3) the respect for the institutions that govern economic and social interactions among them
12
Operationalizing Governance: Unbundling its Definition into Components that
can be measured, analyzed, and worked on
Each of the 3 main components of Governance Definition is unbundled into 2 subcomponents:
• Democratic Voice and (External) Accountability
• Political Instability, Violence/Crime & Terror
• Regulatory Burden
• Government Effectiveness
• Corruption
• Rule of LawWe measure these six governance components…
13
Sources of Governance Data• Data on governance from 25 different sources
constructed by 18 different organizations
• Data sources include cross-country surveys of firms, commercial risk-rating agencies, think-tanks, government agencies, international organizations, etc.)
• Over 200 proxies for various dimensions of governance
• Organize these measures into six clusters corresponding to definition of governance, for four periods: 1996, 1998, 2000, and 2002, covering up to 199 countries
14
Sources of Governance Data
• Cross-Country Surveys of Firms: Global Competitiveness Survey, World Business Environment Survey, World Competitiveness Yearbook, BEEPS
• Cross-Country Surveys of Individuals: Gallup International, Latinobarometro, Afrobarometer
• Expert Assessments from Commercial Risk Rating Agencies: DRI, PRS, EIU, World Markets Online,
• Expert Assessments from NGOs, Think Tanks: Reporters Without Borders, Heritage Foundation, Freedom House, Amnesty International
• Expert Assessments from Governments, Multilaterals:World Bank CPIA, EBRD, State Dept. Human Rights Report
15
Inputs for Governance Indicators 2002Publisher Publication Source Country Coverage
•Wefa’s DRI/McGraw-Hill Country Risk Review Poll 117 developed and developing
•Business Env. Risk Intelligence BERI Survey 50/115 developed and developing
•Columbia University Columbia U. State Failure Poll 84 developed and developing
•World Bank Country Policy & Institution Assmnt Poll 136 developing
•Gallup International Voice of the People Survey 47 developed and developing
•Business Env. Risk Intelligence BERI Survey 50/115 developed and developing
•EBRD Transition Report Poll 27 transition economies
•Economist Intelligence Unit Country Indicators Poll 115 developed and developing
•Freedom House Freedom in the World Poll 192 developed and developing
•Freedom House Nations in Transit Poll 27 transition economies
•World Economic Forum/CID Global Competitiveness Survey 80 developed and developing
•Heritage Foundation Economic Freedom Index Poll 156 developed and developing
•Latino-barometro LBO Survey 17 developing
•Political Risk Services International Country Risk Guide Poll 140 developed and developing
•Reporters Without Borders Reporters sans frontieres (RSF) Survey 138 developed and developing
•World Bank/EBRD BEEPS Survey 27 transition economies
•IMD, Lausanne World Competitiveness Yearbook Survey 49 developed and developing
•Binghamton Univ. Human Rights Violations Research Survey 140 developed and developing
16
Ingredients for Rule of Law IndicatorSurveys of FirmsBEEPS Courts Honest? Crime? Property rights
protected?Global Competitiveness Survey Crime, money laundering, judicial
independence, protection of financial assets
W orld Competitiveness Yearbook Justice fairly administered, personal security and private property protected
Surveys of IndividualsGallup Trust in legal system
Risk Rating AgenciesBERI Contract enforcementDRI Costs of crime, enforceability of contractsEIU Costs of crime, enforceability of contracts,
property rights protectionPRS Law and orderW orld Markets Observer Judicial independence, crime
Think TanksFreedom House Rule of lawHeritage Foundation Property rights, black market activity
GovernmentsState Dept Human Rights Report Judicial independence
Type of Questions
17
Building Aggregate Governance Indicators• Use Unobserved Components Model (UCM) to
construct composite governance indicators, and margins of error for each country
• Estimate of governance: weighted average of observed scores for each country, re-scaled to common units
• Weights are proportional to precision of underlying data sources
• Precision depends on how strongly individual sources are correlated with each other
• Margins of error reflect (a) number of sources in which a country appears, and (b) the precision of those sources
18
Unobserved Components Model• Observed indicator k of governance in country j,
y(j,k), is noisy indicator of true governance in country j, g(j):
• Variance in measurement errors is same across countries for each source, but different across sources:
• Identifying assumption: Measurement errors are uncorrelated across sources ? highly correlated sources measure governance with more precision
( )y j k g j j k( , ) (k) (k) ( ) ( , )= + ⋅ +α β ε
[ ] )k()k,j(E 22εσ=ε
19
Estimates of Governance from UCM• UCM allows us to infer the distribution of
governance in a country conditional on the observed data for that country
• Best estimate of governance is the mean of this conditional distribution:
• So estimate of governance is weighted average of re-scaled scores, with weights proportional to precision of each source:
∑= β
α−⋅=
)j(K
1k )k()k()k,j(y
)k(w))]j(K,j(y),...,1,j(y|)j(g[E
∑=
−ε
−ε
σ+
σ=
)j(K
1k
2
2
)k(1
)k()k(w
20
Precision of Estimates from UCM
• Reliability or precision of estimate of governance for each country is the standard deviation of this conditional distribution:
• These standard errors are smaller for countries that (a) appear in more sources, and/or (b) appear in more reliable sources
21
)j(K
1k
2)k(1))]j(K,j(y),...,1,j(y|)j(g[SD−
=
−ε
σ+= ∑
21
Precision and Number of Sources: Rule of Law, KK 2002
0
0.1
0.2
0.3
0.4
0.5
0.6
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Number of Sources
Sta
nd
ard
Err
or
of
Go
vern
ance
Est
imat
e
22
Assigning Countries to Governance Categories: Margins of Error Matter
Note: Confidence Interval: 90%
AFG
AL
BD
ZA
AG
O
AR
G
AR
M
AU
SA
UT
AZE
BH
S
BH
R
BG
D
BLR
BE
L
BLZ
BO
L
BIH
BW
A
BR
A
BR
NB
GR
BF
A
BD
I
KH
M
CM
R
CA
N
CH
L
CH
N
CO
L
CO
G
CR
I
CIV
HR
V
CU
B
CY
P
CZ
E
DN
K
DO
M
EC
U
EG
Y
SLV
ER
I
ES
T
ET
H
FJI
FIN
FR
A
GA
B
GM
B
GE
O
DE
U
GH
A
GR
C
GT
M
GIN
GN
B
GU
Y
HT
I
HN
D
HK
G
HU
N
ISL
IND
IDN
IRN
IRQ
IRL
ISR
ITA
JAM
JPN
JOR
KA
Z
KE
N
PR
K
KO
R
KW
T
KG
Z
LAO
LVA
LBN
LB
R
LBY
LTU
LUX
MK
D
MD
G
MW
I
MY
S
ML
I
MLT
MR
T
MU
S
ME
X
MD
A
MN
G
MA
R
MO
Z
MM
R
NA
M
NP
L
NLD
NZ
L
NIC
NE
R
NG
A
NO
R
OM
N
PA
K
PA
N
PN
G
PR
Y
PE
R
PH
L
PO
L
PR
TP
RI
QA
T
RO
M
RU
S
RW
A
SA
U
SE
N
SL
E
SG
P
SV
K
SV
N
SO
M
ZAF
ES
P
LK
A
SD
N
SU
R
SW
E
CH
E
SY
R
TW
N
TJK
TZ
A
TH
ATG
O
TTO
TU
N
TU
R
TKM
UG
A
UK
R
AR
E
GB
R
US
A
UR
Y
UZ
B VE
N
VN
M
WT
B
YE
M
YU
G
ZAR
ZMB
ZWE
0
0.25
0.5
0.75
1
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Pro
bab
ility
(0-
1)
-2.5
0
2.5
Co
ntr
ol o
f C
orr
up
tio
n R
atin
g
Median CC Score
Probability Country is in Top Half of Sample
Governance Score
Margin of Error
Control of Corruption Percentile Rank
23
Large Margins of Error for Objective Governance Indicators
0
0.5
1
1.5
2
2.5
3
3.5
Telephone Waitline
Phone faults Trade Taxrevenue
BudgetaryVolatility
Revenue SourceVolatility
ContractIntensive Money
ContractEnforcement
Regulation ofEntry
AggregateIndicator
Sta
nd
ard
err
or
Standard error Objective Indicator Scenario A
Standard error of Subjective indicator: KK 2002
Option A: estimate of standard deviation of measurement error in subjective indicator is correct. Option C: standard deviation of measurement error in subjective indicator is twice as large as that in the objective indicator. The standard error of subjective indicator refers to the Governance component closely related to the associated objective indicator
24
Measurement Error for Objective Indicators
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Correlation of "Subjective" and "Objective" Indicator
Sta
nd
ard
Err
or
for
"Ob
jec
tiv
e"
Ind
ica
tor
Days to Start Business
Contract Intensive Money
Actual S.E. for RL = 0.3
Actual S.E. for RQ = 0.4
( ) ( )22
21
2
111
σ+⋅σ+=ρCorrltn:
Known: Correlation of objective & subjective; standard error of subjective indicatorUnknown: standard error of objective indicator
25
Control of Corruption -- Selected Countries, KK 2002
Source for data: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for 1996-2002, WP #3106, August 2003. Units in vertical axis are expressed in terms of standard deviations around zero. Country estimates are subject to margins of error (illustrated by thin line atop each column), implying caution in interpretation of the estimates and that no precise country rating is warranted.
Good
Bad-2.5
0
2.5
26
Control of Corruption: Selected Countries, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
27
Governance World Map :Control of Corruption, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
28
Governance World Map :Control of Corruption, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
29
Governance World Map :Control of Corruption, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
30Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Governance World Map :Political Stability/ Lack of Violence, 2002
31
Governance World Map :Voice and Accountability, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
32
Governance World Map : Africa and Middle East, Government Effectiveness, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Dark Red, bottom 10th percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
33
Governance World Map : Africa and Middle East, Regulatory Quality, 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Map downloaded from : http://info.worldbank.org/governance/kkz2002/govmap.asp Colors are assigned according to the following criteria: Dark Red, bottom 10th percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
34
Governance Indicators By RegionsPercentile Ranks, 2002
0
50
100
OECD
East A
sia (N
IC)
East A
sia de
v.
Form
er So
viet U
nion
Eastern
Europ
e
Midd
le East
Nor
th Afri
ca
Subsa
haran
Afri
ca
Latin A
merica
Per
cen
tile
Ran
k
Voice And Accountability
Control of Corruption
Source for data: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for 1996-2002, WP #3106, August 2003
Good
Poor
35
Governance Indicators: Chile 1998 vs. 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
36
Governance Indicators: Bolivia 1996, 2000 & 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
37
Governance Indicators: Croatia, 1998 & 2002
Source for data: http://www.worldbank.org/wbi/governance/govdata2002 ; Colors are assigned according to the following criteria: Dark Red, bottom 10th
percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
38
Governance Indicators: Indonesia
Note: the thin lines depict 90% confidence intervals. Colors are assigned according to the following criteria: Red, 25th percentile;Orange, between 25th and 50th percentile; Yellow, between 50th and 75th percentile; Light Green between 75th and 90th
percentile; Dark Green above 90th percentile.Chart downloaded from : http://info.worldbank.org/governance/kkz/.
39
The ‘Mezzo’ Level of Measurement
-- Listening to Firms
-- Large Cross-country Survey of Enterprises
-- Significant More Unbundling is possible
-- Stay mindful of Margins of Error
40
Unbundling Corruption – [Regional Averages]Preliminary results 2003, View of the Firm, 102 countries
0
35
70
East AsiaIndustrialized
O ECD East AsiaDeveloping
EasternEurope
Latin America South Asia Sub-saharanAfrica
Former SovietUnion
% of firms rating type of corruption as high/very high
Access Public Utilities
Procurement
Capture of Laws & Regulations
Extent of Bribery for:
Source: EOS 2003. Each region has the following number of countries: OECD: 23; East Asia (Developing): 6, East Asia (NIC): 4; Eastern Europe: 14; Former Soviet Union: 2 (Russia and Ukraine); South Asia: 4; Sub-Saharan Africa: 21; Middle East North Africa: 7; Latin America and Caribbean: 21.
41
Political Influence by Powerful Firms, EOS 2003
0
50
100
Argenti
na
Botswan
aBraz
il
Camero
on
Colombia
Costa R
icaCroa
tia
Finlan
d
Nigeria
Russian
Feder
ation USA
Zimba
bwe
Influencing political financing
Bribery to shape laws
Source: EOS, 2003. Y axis: % of firms who reported a poor rating (1,2,3) for each of the underlying governance variables.
% firms Reporting Poor Rating
42
Control of Cronyism: Differences across industrialized countries (OECD)
0
50
100D
enm
ark
Au
stri
a
Fin
lan
d
Sw
eden
Sin
ga
po
re
Bo
tsw
an
a
Net
her
lan
ds
Au
stra
lia
Ger
ma
ny
Un
ited
Kin
gd
om
Fra
nce
Un
ited
Sta
tes
Gre
ece
Italy
Per
cen
tile
Ra
nk
Crony Bias constructed based on data from EOS, 2003, in 102 countries, calculated as the difference between influence by firms with political ties and influence by the firm’s own business association.
No Cronyism
Cronyism
43
The ‘Governance Gap’: Overall Evidence is SoberingProgress on Governance is modest at best, so far
• Evidence points to slow, if any, average progress worldwide on key dimensions of governance
• This contrasts with some other developmental dimensions (e.g. quality of infrastructure; quality of math/science education; effective absorption of new technologies), where progress is apparent
• At the same time, substantial variation cross-country, even within a region. Some successes.
•And it is early days.
44
0
1.5
3
1984-1988 1989-1993 1994-1998 1999-2001
TRANSITION
EMERGING
OECD+NIC
Source: ‘Rethinking Governance’, based on calculations from WDI. Y-axis measures the log value of the average inflation for each region across each period
Significant Decline in Inflation Rates WorldwideHighInflation
Low
(avg. inlogs)
45
Quality of Infrastructure
1.5
4
6.5
1997 1998 1999 2000 2001 2002 2003
High
Low
East AsiaIndustrialized
OECD
Transition
Emerging
Source: EOS 1997-2003 (Quasi-balanced panel). Question 6.01: General infrastructure in your country is among the best in the world?
46
Extent of Independence of the Judiciary
2
4.5
7
1998 1999 2000 2001 2002 2003
Independent
Non-Independent
OECD
East AsiaIndustrialized
Transition
Emerging
Source: EOS 1998-2003 (Quasi-balanced panel). Question 5.01: The judiciary in your country is independent from political influences of members of government, citizens or firms?
47
Rule of Law and Corruption have not improved recently
0.00
0.25
0.50
0.75
1.00
1996 1998 2000 2002
Control of Corruption
Rule of LawGood
Poor
Why should we be concerned?…
48
In emerging economies, while on average little progress, there are excellent examples,
and possible to learn from variation
• In Africa, Mauritius, Botswana as stars, Ghana has made some inroads, as well as Mali and to an extent Madagascar; Sierra Leone and a few others making some progress in some dimensions?
• In other continents, the cases of Slovenia, Hungary, the 3 Baltic countries, Costa Rica, S. Korea, Chile
49
On the ‘Micro’ Level
In-depth, in-country Diagnostics:
Surveys of citizens/users of public services, enterprises and public officials
(complementing Worldwide Aggregate Governance Indicators, and Mezzo cross-country enterprise surveys)
50
Diagnostic evidence from Sierra Leone…Perceived level of honesty in public institutions(as reported by managers, public officials and households)
0% 10% 20% 30% 40%
Bank of Sierra Leone
Sierra Leone Broadcasting Service (SLBS)
Sierra Leone Water Company (SALWACO)
University of Sierra Leone
Ministry of Gender Social Welfare & Children’s Affairs
Law Officers Department
Income Tax Department
Surveys and Lands Department
Traffic police
Customs Department
% of respondents reporting the institution to be honest households public officials business
51
Corruption is a ‘Regressive TaxCorruption is a ‘Regressive Tax’’ (Colombia)
0
2
4
6
8
10
12
14
16
18
Bajo Ingreso Mediano Ingreso Alto Ingreso
Bajo Ingreso Mediano Ingreso Alto Ingreso
52
-5
0
5
10
15
20
Low Moderately Low Moderately High High
Politicization
New Diagnostic Tools permit measuring important dimensions of capacity – illustration #1 from Bolivia diagnostics:
How Politicized Agencies exhibit Budgetary Leakages
Yellow columns depict the unconditional average for each category. Blue line depicts the controlled causal effect from X to Y variables. Dotted red lines depict the confidence ranges around the causal effect depicted by the blue line.
53
Illustration of empirical analysis based on diagnostic: Illustration of empirical analysis based on diagnostic: UsersUsers’’ Feedback to Public Agencies Helps Control BriberyFeedback to Public Agencies Helps Control Bribery
Based on 90 national, departmental, and municipal agencies covered in the Bolivia Public Officials Survey.
10
20
30
40
50
Low Moderate_Low Moderate_High High
Voice / External Accountability
Bri
bery
Simple Average Association Control Causal Link Margin of Error
54
Citizen Voice Improves Accessibility of Public Services to the Poor
Based on Public Officials Survey. The sample of institutions includes 44 national, departmental, and municipal agencies which are a prior anticipated to be accessible to the poor
0
20
40
60
80
100
10 20 30 40 50 60 70 80 90
Voice / External Accountability
Acc
essi
bilit
y to
the
Poo
r
ControlledCausalLink
r = 0.54
55
Transparency within Government Agencies Prevents Purchase of Public Positions
Based on 90 national, departmental, and municipal agencies covered in the Public Officials Survey.
3
6
9
12
15
18
Low Moderately Low Moderately High High
Internal Transparency
Job
Pu
rch
ase
Simple Average Association Control Causal Link Margin of Error
56
Peru: Sources of Undue Private Influence on the State
10
40
70
100
DrugConglomerates
EconomicGroups
FDI/TransnationalCorporations
OrganizedCrime
ProfessnlAssociations
Labor Unions
% r
epo
rtin
g a
gen
t is
hig
hly
infl
uen
tial
Firms Public officialsBased on governance diagnostic surveys of public officials and enterprises
Responses by:
57
Some Key Lessons from Empirical Research
Consequences and Costs of Misgovernance:• Lower Incomes, Investment; Poverty & Inequality• But no automatic virtuous circle (from incomes)Determinants of Misgovernance and Corruption:• Capture and Undue Influence by Vested Interests • No Voice, Press Freedoms, Devolution, Transparency• Low Professionalism of Public Service• No Example from the Top / Lack of Leadership• Easy and Gradualist Panaceas• But Endogeneity a challenge: Need to search for more
fundamental determinants: political, historical variables
58
Does Good Governance Really Matter?
Worldwide Evidence: Improved Governance, Public and Private, makes an enormous
difference in Per Capita Incomes of Nations• Good Governance ‘Pays’: The 400% ‘Dividend’
• The reverse causality does not hold: -- No Evidence that Higher Incomes/Richer
countries automatically results in improved governance
59
Governance Indicators and Income per Capita, WorldwideIn
com
e pe
r ca
pita
Voice and Accountability Government Effectiveness Control of Corruption
Low Level of GovernanceMedium Level of GovernanceHigh Level of Governance
US$3,000
US$20,000
US$400
High
Low
Sources: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for 1996-2002 (KK 2002); Income per capita (in Purchasing Power Parity terms) obtained from Heston-Summers (2000) and CIA World Factbook (2001).
60
Child Mortality vs. anti-Corruption: One-directional causality
AFG
DZA
AGO
ATG
BGD
BRA
BDI
CMR
CAN
CAFTCD
CHL
CHN
COGZAR
CRI
HRV
DNK
DOM
EGY
ES T
ETH
FIN
FRA
GHA
GTM
GIN
HTI
IS L
IRN
IRQ
ITA
CIV
J AM
PRK
KOR
LBR
LBY
MRTMMR
NLD
NER
NGA
NOR
P AK
P ER
P HL
RUS
RWA
S LE
S VN
S OM
ZAFS DN
TUN
TKM
UGA
GBR
US A
URY
VEN
YEM
ZMB
ZWE
-2.5 0.0 2.5Control of Corruption
Ch
ild
Mo
rtal
ity
per
1,0
00 b
irth
s (l
og
)
Source: KK 2002, WDI 2002
Low High
r = -0.77
0
10
200
61
Source of Women’s Right Variable: Stohl, Michael (Convenor) Global Studies Program, Global Governance of Human Rights
Women Rights and Corruption Control
AGO
ARE
ARG
AUSAUT
BEL
BFA
BGD
BHR
BOL
BWA
CANCHE
CHL
CHNCIV
CMR
COG
COL
CRI
CZE
DEU
DNK
DOMDZA
ECUEGY
ESP
FIN
FRA
GAB
GBR
GHA
GIN
GNB
GRC
GTM
HND
HTI
HUN
IDN
IND
IRL
IRN
•IRQ
ISR
ITA
JOR
JPN
KEN
KOR
KWT
LBY
LKA
MAR
MEX
MLI
MMR
MYS
NER
NGA
NLD
NORNZL
PAKPAN
PHL
POL
PRT
PRY
RUS
SAUSDN
SEN
SLE
SWE
SYR
TGO
THATUN
TZA
URY
USA
VEN
YEM
YUGZMB
ZWE
R2
= 0.38
0
1
2
3
4
5
6
7
8
9
4 4.5 5 5.5 6 6.5 7
Women Social and Economic Rights, 1990s
Cor
rupt
ion
Inde
x (I
CR
G, 1
990s
) 10
62
Controlling Corruption and Voice and Accountability
0
40
80
Low Average High
Con
trol
of
Cor
rup
tion
Good
Poor
Voice and Accountability
63
Freedom of the Press to improve Rule of Law and Controlling Corruption
0
40
80
Not Free Average Free
Per
cent
ile R
ank
Rule of LawControl of Corruption
Sources: Freedom House, 2002 and KK2002
Good
Poor
64
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1990 1991 1993 1994 1995
US$ per student
Intended grant Actual grant received by primary school (means)
1999
Source: Uganda Public Expenditure Tracking Surveys
Tracking Education Dollars in Uganda
Transparency and Citizen Oversight
Public info campaign
65
No Evidence to support some ‘popular’ notions
1. Constant drafting of new A-C laws/regulations
2. Creating many new Commissions & Agencies
3. Blaming Globalization or Privatization
4. Cultural Relativism (or Regional Characteristics)
5. Historical Determinism
…by contrast, what may be particularly important…
66
What may work…a ‘list of 10’ for debate
1. Localize Know-how, and Unbundle notions2. Transparency Mechanisms (e*governance, data)
3. Voice and Democratic Accountability (& media)
4. Judicial Independence, Property Rights (RoL)
5. Prevention, Incentives (e.g. Meritocracy, Budget)
6. Political Reform, incl. Political Finance7. Private Sector & MNCs: Corporate Responsibility
8. Compete -- to join world’s ‘Economic Clubs’9. IFI, G-8, OECD Responsibility (Global Compact)
10. With modesty: learning, interdisciplinary approach
67
On the growing gap between EU-accession countries and the rest of transition --Rule of Law Over Time, Selected Regions, 1996-2002
-1
0
1
2
1996 1998 2000 2002
Rul
e of
Law
OECD
East Asia (NIC)
Transition EUAccession Countries
Sub-Saharan Africa
Other TransitionCountries
Source for data: http://www.worldbank.org/wbi/governance/govdata2002.
Each region has the following number of countries: OECD: 28; East Asia (Developing): 35, East Asia (NIC): 4; Eastern Europe: 16;Former Soviet Union: 12; South Asia: 8; Sub-Saharan Africa: 47; Middle East North Africa: 21; Latin America and Caribbean: 38.
High
Low
68
Illustration of Concrete Projects and Measures promoting Transparency and Accountability
• Transparency & reform in political/party finance: e.g. new methods for disclosure (expenses), etc.
• E*disclosure (web) of votes of parliamentarians
• Public Disclosure of Assets/Incomes by public officials and legislators and their dependents
• E*procurement; e*data.governance; diagnostics
• In-depth Institutional Country Diagnostics for Agency and Budgetary transparency
• Delisting Firms Publicly
69
Working with Competitive Business Associations does Matter
0102030405060708090
Hungary Russia Azerbaijan
Business association members
(% of firms)
Active members Nonactive members
Source: J. Hellman, G. Jones, D. Kaufmann. 2000. “Seize the State, Seize the Day: State Capture, Corruption and Influence in Transition” World Bank Policy Research Working Paper 2444.
70
New Empirical Frontiers
• Political Finance, Capture & Corruption
• Subnational Level: ‘Governance and the City’
• The Human Rights Nexus
71
Data for Analysis and informing Policy Advise, not for Precise Rankings
Data in this presentation is from aggregate governance indicators, surveys, and expert polls and is subject to a margin of error. It is not intended for precise comparative rankings across countries, but to illustrate performance measures to assist in drawing implications for strategy. It does not reflect official views on rankings by the World Bank or its Board of Directors. Errors are responsibility of the author(s), who benefited in this work fromcollaboration with many Bank staff and outside experts.
www.worldbank.org/wbi/governance