TOWARDS A MULTIDIMENSIONAL MEASURE OF GOVERNANCE SHABANA SINGH VANDERBILT UNIVERSITY APRIL 2011

“Government is not reason; it is not eloquence; it is force! It is a dangerous servant and a terrible master.” – George Washington, 1st President of USA.  What is governance?  UNDP: "comprises the mechanism and process for citizens and groups to articulates their interests, mediate their differences and exercise their legal rights and obligations.”  European Commission: "the way public functions are carried out, public resources are managed and public regulatory powers are exercised".  World Bank: "the state's institutional arrangements; the processes for formulating policy, decision making, and implementation; information flows within government; and the overall relationship between citizens and government."

INTRODUCTION  The available indices:  Broad focus indices:  Political Freedom Index (HDR, 1992)  World Governance Indices by World Bank  Mo Ibrahim’s Index of African Governance  Narrow focus indices:  Corruption Perception Index by Transparency International

INTRODUCTION Political Freedom Index: Personal Security Rule of Law Freedom of expression Political Participation Equality of Opportunity Worldwide Governance Indicators Voice and Accountability Political Stability and Absence of Violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption Mo Ibrahim’s Index of African Governance Safety and Security Rule of law, Transparency Corruption. Participation and Human Rights Human Development Sustainable Economic Opportunity Governance is a multidimensional phenomena

INTRODUCTION  Broad concerns about governance indicators:  What is governance and what indicators should be incorporated?  (Arndt and Oman 2006), (Thomas 2010)  Quality of data and cross-country comparisons  (Kaufmann and Kraay 2007), (Julius Court and Mease 2002) and (Knack, Kugler, and Manning 2003)  The sensitivity of the measures to the scaling of data  This issue is the main focus of this paper

MO IBRAHIM’S IAG The data:  57 indicators of Governance for 48 countries in Africa  Multiples sources for data, like Transparency International, CIRI Human Rights Data  18 of the 57 indicators are ordinal variables Three tier structure to the index.  57 indicators are divided into 15 sub-categories.  15 sub-categories are aggregated up to five dimension indices. Five dimensions of Governance are aggregated to get a single measure of Governance

MO IBRAHIM’S IAG Governance Safety and Security National Security Public Security Rule of law, Transparency Corruption. Ratification of critical legal norms Existence of Independent and Efficient Judicial Systems Corruption Participation and Human Rights Participation Respect of Human Rights Absence of discrimination Sustainable Economic Opportunity Wealth Creation The Arteries of Commerce Environmental Sensitivity Human Development Poverty and Inequality Health Education

MO IBRAHIM’S IAG Safety and Security National Security Government involvement in armed conflict No. of battle deaths No. of internally displaced persons No. of civilian deaths due to one-sided violence Ease of Access to Small Arms and Light Weapons No. of refugees and asylum seekers from this nation Public Security Level of Violent Crime (Homicides Rates)

MO IBRAHIM’S IAG

MAIN ISSUE The IAG has 18 of its 57 indicators as ordinal variables. IAG imputes cardinal values to ordinal data Problematic: Choice of scale can affect the rankings of different nations Example: 4 nations and 4 dimensions. We use a simple average across the 4 dimensional values to arrive at an overall measure. Observations can take values on a scale of 0-10 in each dimension. Higher values indicate better performance.

EXAMPLE- ORDINAL DATA Nation A has the lowest score and Nation D has the highest. Undertake the following exercise, with the data above: Rescale the data to a scale. Square the value in each dimension to get the new rescaled values. Compute the composite index, as done previously (simple average of the scores in each dimension). Dimension 1Dimension 2Dimension 3Dimension 4 Average Score Country A Country B Country C Country D

EXAMPLE- ORDINAL DATA Nation A now has the highest score! Note: The ranking of the nations in each specific dimension are preserved. The aggregation (simple average) results in a new scheme for the composite index. Dimension 1Dimension 2Dimension 3Dimension 4 Average Score Country A Country B Country C Country D

REVISITING ALKIRE- FOSTER METHODOLOGY  Identifcation stage: Dual cut-off  Deprivation cutoffs idenfity whether deprived in the that index  Dimension cutoff: No. of indicators one has to be deprived in to be considered poor  Aggregation stage : FGT based measure:  For ordinal dimensions use the multidimensional adjusted headcount (M 0 )  For cardinal dimensions use the any of the class of measures

REVISIT: EXAMPLE Dimension 1Dimension 2Dimension 3Dimension 4Av Score Country A Country B Country C Country D Dimension 1Dimension 2Dimension 3Dimension 4Av. Score Country A Country B Country C Country D Cutoff5845 Using the AF methodology: Note: Lower scores imply better performance Original data: With a scale of 0-10

REVISIT: EXAMPLE Dimension 1Dimension 2Dimension 3Dimension 4Av Score Country A Country B Country C Country D Dimension 1Dimension 2Dimension 3Dimension 4Av Score Country A Country B Country C Country D Cutoff Rescaled data: Scale Using AF Methodology on the new data: Notice: No change in rankings!

A NEW GOVERNANCE INDEX  Indicators are aggregated using AF to give dimension specific governance indices  Average of these dimension specific indices gives overall level of governance for the nation  Do not aggregate across nations.  For the IAG the dimensions: Safety and Security, Rule of law, Transparency Corruption & Participation and Human Rights  Treat them as ordinal, use M 0  For IAG dimensions: Human Development & Sustainable Economic Opportunity  Treat them as cardinal, use M 1

A NEW GOVERNANCE INDEX  For ordinal dimensions  For cardinal dimensions  Overall governance is

MAIN RESULTS CountryGovernance indexRankIAG RankDifference in Ranks Cape Verde Mauritius Lesotho Gabon Ghana Rwanda Swaziland Sierra Leone Benin Burkina Faso Central African Republic Sudan Chad Congo, Democratic Rep Somalia

RESULTS (STRICT LINES) CountryGovernance indexRankIAG RankDifference in Ranks Cape Verde Mauritius Lesotho Ghana Gabon Rwanda Benin Burkina Faso Swaziland Sierra Leone Central African Republic Sudan Chad Congo, Democratic Rep Somalia

RESULTS (SOFTER LINES) CountryGovernance indexRankIAG RankDifference in Ranks Cape Verde Ghana Mauritius Gabon Lesotho Rwanda Benin Burkina Faso Swaziland Sierra Leone Central African Republic Sudan Chad Congo, Democratic Rep Somalia

COMPARISON IAG Methodology Scaling of all indicators is necessary Gives value interpretation to ordinal variables Retain information on depth of deprivation within a dimension (indicator). New Methodology No scaling required Can be used with ordinal variables Gain information on depth of deprivation in governance (in terms of k) across the indicators Focus on deprived nations and dimensions (with the indicator- specific cutoffs)

REPORT CARDS The new index is a counting approach where zero implies not governance poor and one implies maximum deprivation. This allows a very convenient representation a nation’s performance. Governance Report Card Report card for Rwanda: RwandaRank: 21 DimensionScoreBest Score Safety and Security0.110 Rule of Law0.670 Human Rights0.110 Sustainable Economic Development0.410 Human Development Overall Governance