Global Policy Forum

By Daniel Kaufman, Aart Kray, Pablo Zoido-Lobatón

How can governments and civil society best encourage institutional change by developing and applying a systematic approach to measuring governance, its determinants, and its consequences? That's the question posed by Daniel Kaufmann, Aart Kraay and Pablo Zoido-Lobatón of the World Bank in the latest issue of the IMF's quarterly magazine Finance & Development.

Practical experience in many countries suggests that weak governance and slow economic development go hand in hand, while improved governance fosters development success, the authors write. The same is true at the subnational level. In Argentina, corruption in procurement and budget allocation was found to be common in the province of Corrientes. In contrast, in the city of Buenos Aires, a participatory program to enhance transparency in procurement is bringing about major improvements. And in Campo Elias, Venezuela, far-reaching municipal reforms cut corruption in half and improved efficiency.

These examples show that while governance failures are widespread and costly, good governance provides significant benefits. Besides anecdotes, a wealth of cross-country indicators of various aspects of governance now exist and strongly suggest that governance has a major impact on development.

"But even the best cross-country governance indicators remain imprecise and say little about the specific institutional failures that bring about weak governance in a particular setting," the authors write, adding that "the real challenge lies in working with countries to empirically diagnose, identify, and address these failures at the national, subnational, and corporate levels and in understanding the key linkages between them."

The enormous potential of information to identify policy priorities, empower stakeholders, and build political consensus for concerted and informed action to improve governance is only beginning to be realized as a small but growing number of courageous national, municipal, and corporate leaders muster support for these governance-enhancing innovations.

Daniel Kaufmann is Senior Manager of the World Bank Institute's Governance, Regulation, and Finance Group.

Aart Kraay is a Senior Economist in the Development Research Group of the World Bank's Development Economics Vice Presidency.

Pablo Zoido-Lobatón is an Economist in the World Bank Institute's Governance, Regulation, and Finance Group.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.