Governance¶
Purpose and Perspective¶
The Governance sector calculates, based on the World Governance Indicators database [1], a composite index of governance. This composite index assigns the same weight to each governance indicator, and normalizes their value on a 0 to 1 scale. The composite indicator, as well as individual governance indicators, is used in several sectors to determine productivity and effectiveness of public expenditure.
The six governance indicators are exogenously determined based on the World Governance Indicators database, and different values can be used for future projections to reflect different assumptions about improvement in governance over time.
Model Structure and Major Assumptions¶
World Governance Indicators provide a good proxy for the level of governance in a country [2]
Exogenous Input Variables¶
Control of corruption - Units: Dmnl
Government effectiveness - Units: Dmnl
Political stability and absence of violence - Units: Dmnl
Regulatory quality - Units: Dmnl
Rule of law - Units: Dmnl
Voice and accountability - Units: Dmnl
Initialization Variables¶
None
Modeling Details¶
The six governance indicators from the World Governance Indicators database are originally scaled on a -2.5 to 2.5 range. In order to create a composite indicator to be used across the model, the indicators have been normalized on a 0 to 1 scale, where 0 corresponds to the -2.5 level in the original scale, and 1 corresponds to the 2.5 level.
Footnotes and References¶
[1] Kaufmann, D., Kraay, A. (2002). Governance Matters II, Updated Indicators for 2000/01. Policy Research Working Paper, (2772). Washington, DC: World Bank.
[2] Kaufmann, D., Kraay, A. (2002). Governance Matters II, Updated Indicators for 2000/01. Policy Research Working Paper, (2772). Washington, DC: World Bank.
