This indicator measures the quality of public services, the quality of the civil service and its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to its stated policies.
Countries are evaluated on the following factors:
- competence of civil service; effective implementation of government decisions; and public service vulnerability to political pressure;
- ability to manage political alternations without drastic policy changes or interruptions in government services;
- flexibility, learning, and innovation within the political leadership; ability to coordinate conflicting objectives into coherent policies;
- the efficiency of revenue mobilization and budget management;
- the quality of transportation infrastructure, telecommunications, electricity supply, public health care provision, and public schools; the availability of online government services;
- policy consistency; the extent to which government commitments are honored by new governments;
- prevalence of red tape; the degree to which bureaucratic delays hinder business activity;
- existence of a taxpayer service and information program, and an efficient and effective appeals mechanism;
the extent to which:
- effective coordination mechanisms ensure policy consistency across departmental boundaries, and administrative structures are organized along functional lines with little duplication;
- the business processes of government agencies are regularly reviewed to ensure efficiency of decision making and implementation;
- political leadership sets and maintains strategic priorities and the government effectively implements reforms;
- hiring and promotion within the government is based on merit and performance, and ethical standards prevail;
- the government wage bill is sustainable and does not crowd out spending required for public services; pay and benefit levels do not deter talented people from entering the public sector; flexibility (that is not abused) exists to pay more attractive wages in hard-to-fill positions;
- government revenues are generated by low-distortion taxes; import tariffs are low and relatively uniform, export rebate or duty drawbacks are functional; the tax base is broad and free of arbitrary exemptions; tax administration is effective and rule-based; and tax administration and compliance costs are low;
- policies and priorities are linked to the budget; multi-year expenditure projections are integrated into the budget formulation process, and reflect explicit costing of the implications of new policy initiatives; the budget is formulated through systematic consultations with spending ministries and the legislature, adhering to a fixed budget calendar; the budget classification system is comprehensive and consistent with international standards; and off-budget expenditures are kept to a minimum and handled transparently;
- the budget is implemented as planned, and actual expenditures deviate only slightly from planned levels;
- budget monitoring occurs throughout the year based on well functioning management information systems; reconciliation of banking and fiscal records is practiced comprehensively, properly, and in a timely way;
- in-year fiscal reports and public accounts are prepared promptly and regularly and provide full and accurate data; the extent to which accounts are audited in a timely, professional and comprehensive manner, and appropriate action is taken on budget reports and audit findings.
Relationship to Growth & Poverty Reduction
Countries with more effective governments tend to achieve higher levels of economic growth by obtaining better credit ratings and attracting more investment, offering higher quality public services and encouraging higher levels of human capital accumulation, putting foreign aid resources to better use, accelerating technological innovation, and increasing the productivity of government spending. 1 Efficiency in the delivery of public services also has a direct impact on poverty. 2 On average, countries with more effective governments have better educational systems and more efficient health care. 3 There is evidence that countries with independent, meritocratic bureaucracies do a better job of vaccinating children, protecting the most vulnerable members of society, reducing child mortality, and curbing environmental degradation. 4 Countries with a meritocratic civil service also tend to have lower levels of corruption. 5
The indicator is an index combining up to 15 different assessments and surveys, depending on availability, each of which receives a different weight, depending on its estimated precision and country coverage. The Government Effectiveness indicator draws on data, as applicable, from the Country Policy and Institutional Assessments of the World Bank, the African Development Bank and the Asian Development Bank, the Afrobarometer Survey, the World Bank’s Business Environment and Enterprise Performance Survey, the Bertelsmann Foundation’s Bertelsmann Transformation Index, Global Insight’s Business Conditions and Risk Indicators, the Economist Intelligence Unit’s Country Risk Service, the World Economic Forum’s Global Competitiveness Report, the Gallup World Poll, the International Fund for Agricultural Development’s Rural Sector Performance Assessments, the French Government’s Institutional Profiles Database, the Latinobarometro Survey, Political Risk Service’s International Country Risk Guide, and the Institute for Management and Development’s World Competitiveness Yearbook.
- 1. Burnside, C. and David Dollar. 2000. Aid, Policies and Growth. American Economic Review 90(4): 847-868. Burnside, C. and David Dollar. 2000. “Aid, Growth, the Incentive Regime, and Poverty Reduction.” in The World Bank: Structure and Policies, edited by Christopher L. Gilbert and David Vines. Oxford: Oxford University Press. Brunetti, Aymo. 1998. Policy Volatility and Economic Growth: A Comparative, Empirical Analysis. European Journal of Political Economy 14: 35-52. Fatas, Antonio, and Ilian Mihov. 2005. Policy Volatility, Institutions and Economic Growth. INSEAD. Brunetti, A., Kisunko, G., and B. Weder. 1998. Credibility of rules and economic growth: evidence from a worldwide survey of the private sector. World Bank Economic Review 12, 353–384. Asteriou, Dimitrios, and Simon Price. 2005. Uncertainty, Investment and Economic Growth: Evidence from a Dynamic Panel. Review of Development Economics 9(2): 277-288. Sarte, P.-D. G. 2001. Rent-Seeking Bureaucracies and Oversight in a Simple Growth Model. Journal of Economic Dynamic and Control. 25: 1345-1365. Ayal, E., and G. Karras. 1996. Bureaucracy, investment, and growth. Economics Letters. 51(2): 233-259. Baum, Matthew A., and David A. Lake. 2003. The Political Economy of Growth: Democracy and Human Capital. American Journal of Political Science. 47: 333-347. Easterly, William, Jozef Ritzen, and Michael Woolcock. 2006. Social Cohesion, Institutions, and Growth. Economics & Politics 18(2): 103-120. Rauch, James E., and Peter B. Evans. 2000. Bureaucratic Structure and Bureaucratic Performance in Less Developed Countries. Journal of Public Economics 75: 49-71. Ayal, E., and G. Karras. 1996. Bureaucracy, investment, and growth. Economics Letters 51(2): 233-259. Corsi, Marcella, Andrea Gumina, and Carlo D’Ippoliti. 2006. eGovernment Economics Project (eGEP) Economic Model Final Version.” eGovernment Unit, European Commission. Kaufmann, Daniel, and Aart Kraay. 2002. Growth without Governance. Economia 3: 169-229. Rajkumar, A.S. and V. Swaroop. 2002: Public Spending and Outcomes: Does. Governance Matter? World Bank Policy Research Working Paper 2840. Hall, Robert E. and Charles Jones. Why Do Some Countries Produce So Much More Output per Worker than Others? Quarterly Journal of Economics 114: 83-116. Keefer, Phillip and Steve Knack. Forthcoming. Boondoggles, Rent-seeking and Political Checks and Balances: Public Investment Under Unaccountable Governments. Review of Economics and Statistics. Evans, Peter and James Rauch. 1999. Bureaucracy and Growth: A Cross-National Analysis of the Effects of ‘Weberian’ State Structures on Economic Growth. American Sociological Review 64(5): 748-765.
- 2. Gupta, Sanjeev, Hamid R. Davoodi, and Rosa Alonso-Terme. 2002. Does Corruption Affect Income Inequality and Poverty? Economics of Governance 3: 23-45. Chong, Alberto and César Calderón. 2000. Institutional quality and poverty measures in a cross-section of countries. Economics of Governance 1(2): 123-135. Abed, George T. and Sanjeev Gupta (eds.). 2002. Governance, Corruption and Economic Performance. Washington D.C.: International Monetary Fund. Léautier, Frannie (ed.). 2006. Cities in a Globalizing World Governance, Performance, and Sustainability. Washington D.C.: World Bank.
- 3. Lewis, Maureen. 2006. Governance and Corruption in Public Health Care Systems. Center for Global Development Working Paper 78. Washington D.C.: Center for Global Development. Baldacci, E., Benedict Clements, Sanjeev Gupta and Qiang Cui. 2004. Social Spending, Human Capital and Growth in Developing Countries: Implications for Achieving the MDGs. IMF Working Paper 04/217.
- 4. Lewis, Maureen. 2006. Governance and Corruption in Public Health Care Systems. Center for Global Development Working Paper 78. Washington D.C.: Center for Global Development. Esty, Daniel and Michael Porter. 2005. National environmental performance: an empirical analysis of policy results and determinants. Environment and Development Economics 10: 391–434.
- 5. Rauch, James E. 2001. Leadership Selection, Internal Promotion, and Bureaucratic Corruption in Less Developed Polities. Canadian Journal of Economics 34(1): 240–258. World Bank. 2003. Understanding Public Sector Performance in Transition Countries—An Empirical Contribution. Washington, D.C.: World Bank.