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Rule of Law: Estimate

The Worldwide Governance Indicators (WGI) are a research dataset summarizing the views on the quality of governance provided by a large number of enterprise, citizen and expert survey respondents in industrial and developing countries. Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. The WGI measures six dimensions of governance: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. Rule of Law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence. Estimate gives the country's score on the aggregate indicator, in units of a standard normal distribution, i.e. ranging from approximately -2.5 to 2.5. For each dimension of governance the following information is available in the database: estimate, percentile rank, lower bound of 90% confidence interval, upper bound of 90% confidence interval, standard error, number of sources.

The Worldwide Governance Indicators (WGI) are a research dataset summarizing the views on the quality of governance provided by a large number of enterprise, citizen and expert survey respondents in industrial and developing countries. Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. The WGI measures six dimensions of governance: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. Rule of Law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence. Estimate gives the country's score on the aggregate indicator, in units of a standard normal distribution, i.e. ranging from approximately -2.5 to 2.5. For each dimension of governance the following information is available in the database: estimate, percentile rank, lower bound of 90% confidence interval, upper bound of 90% confidence interval, standard error, number of sources.

Worldwide Governance Indicators, World Bank (WB), uri: www.govindicators.org

Public Sector: Policy & institutions

Units of a standard normal distribution (between -2.5 and 2.5, approximately)

Annual

Methodology: The WGI are composite governance indicators based on over 30 underlying data sources. These data sources are rescaled and combined to create the six aggregate indicators using a statistical methodology known as an Unobserved Components Model (UCM). A key feature of the methodology is that it generates margins of error for each governance estimate. These margins of error need to be taken into account when making comparisons across countries and over time. Each of the six aggregate WGI measures are constructed by averaging together data from the underlying sources that correspond to the concept of governance being measured. This is done in the three steps: STEP 1: Assigning data from individual sources to the six aggregate indicators. Individual questions from the underlying data sources are assigned to each of the six aggregate indicators. For example, a firm survey question on the regulatory environment would be assigned to Regulatory Quality, or a measure of press freedom would be assigned to Voice and Accountability. The individual variables used in the WGI and how they are assigned to the six aggregate indicators, can be found on the WGI website [https://www.worldbank.org/en/publication/worldwide-governance-indicators]. Note that not all of the data sources cover all countries, and so the aggregate governance scores are based on different sets of underlying data for different countries. STEP 2: Rescaling of the individual source data to run from 0 to 1. The questions from the individual data sources are first rescaled to range from 0 to 1, with higher values corresponding to better outcomes. If, for example, a survey question asks for responses on a scale from a minimum of 1 to a maximum of 4, we rescale a score of 2 as (2-min)/(max-min)=(2-1)/3=0.33. When an individual data source provides more than one question relating to a particular dimension of governance, the rescaled scores are averaged together. The 0-1 rescaled data from the individual sources are available interactively through the WGI website [https://www.worldbank.org/en/publication/worldwide-governance-indicators/interactive-data-access] and in the data files for each individual source [https://www.worldbank.org/en/publication/worldwide-governance-indicators/documentation#2]. Although nominally in the same 0-1 units, this rescaled data is not necessarily comparable across sources. For example, one data source might use a 0-10 scale but in practice most scores are clustered between 6 and 10, while another data source might also use a 0-10 scale but have responses spread out over the entire range. While the max-min rescaling above does not correct for this source of non-comparability, the procedure used to construct the aggregate indicators does (see below). STEP 3: Using an Unobserved Components Model (UCM) to construct a weighted average of the individual indicators for each source. A statistical tool known as an Unobserved Components Model (UCM) is used to make the 0-1 rescaled data comparable across sources, and then to construct a weighted average of the data from each source for each country. The UCM assumes that the observed data from each source are a linear function of the unobserved level of governance, plus an error term. This linear function is different for different data sources, and so corrects for the remaining non-comparability of units of the rescaled data noted above. The resulting estimates of governance are a weighted average of the data from each source, with weights reflecting the pattern of correlation among data sources. The weights applied to the component indicators.

Good governance is essential for development. It helps countries improve economic growth, build human capital, and strengthen social cohesion. Empirical evidence shows a strong causal relationship between better governance and better development outcomes. The Worldwide Governance Indicators (WGI) are designed to help researchers and analysts assess broad patterns in perceptions of governance across countries and over time. The WGI cover over 200 countries and territories, measuring six dimensions of governance starting in 1996: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. The aggregate indicators are based on several hundred individual underlying variables, taken from a wide variety of existing data sources. The data reflect the views on governance of survey respondents and public, private, and NGO sector experts worldwide.

The six composite WGI measures are useful as a tool for broad cross-country comparisons and for evaluating broad trends over time. However, they are often too blunt a tool to be useful in formulating specific governance reforms in particular country contexts. Such reforms, and evaluation of their progress, need to be informed by much more detailed and country-specific diagnostic data that can identify the relevant constraints on governance in particular country circumstances. The WGI are complementary to a large number of other efforts to construct more detailed measures of governance, often just for a single country. Users are also encouraged to consult the disaggregated individual indicators underlying the composite WGI scores to gain more insights into the particular areas of strengths and weaknesses identified by the data. The WGI do not reflect the official views of the Natural Resource Governance Institute, the Brookings Institution, the World Bank, its Executive Directors, or the countries they represent. The WGI are not used by the World Bank Group to allocate resources.

The UCM assigns greater weight to data sources that tend to be more strongly correlated with each other. While this weighting improves the statistical precision of the aggregate indicators, it typically does not affect very much the ranking of countries on the aggregate indicators. The composite measures of governance generated by the UCM are in units of a standard normal distribution, with mean zero, standard deviation of one, and running from approximately -2.5 to 2.5, with higher values corresponding to better governance. The data is also reported in percentile rank terms, ranging from 0 (lowest rank) to 100 (highest rank). Statistical concept(s): The six aggregate indicators are reported in two ways: (1) in their standard normal units, ranging from approximately -2.5 to 2.5, and (2) in percentile rank terms from 0 to 100, with higher values corresponding to better outcomes. A key feature of the WGI is that all country scores are accompanied by standard errors. These standard errors reflect the number of sources available for a country and the extent to which these sources agree with each other (with more sources and more agreement leading to smaller standard errors). These standard errors reflect the reality that governance is difficult to measure using any kind of data. In most measures of governance or the investment climate they are however left implicit or ignored altogether.

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