Uses and Abuses of Governance Indicators - Summary

A veritable explosion of interest in the quality of “governance” in the developing world is driving explosive growth in the use of governance indicators by international investors and both national and multilateral official OECD development cooperation agencies.  Based on the maxim that you can only manage what you can measure, these decision makers seek to quantify the quality of governance in developing and emerging-market economies.

Among the hundreds of governance-indicator datasets that have emerged in response to this demand, the most widely used are composite perceptions-based governance indicators.  More than users seem widely to perceive, however, even the most carefully constructed of these indicators lack transparency and comparability over time, suffer from selection bias, and are not well suited to help developing countries identify how effectively to improve the quality of local governance.  Users – mainly people located outside developing countries – thus tend to use, and widely misuse, these indicators to compare the quality of governance both among countries and over time.

The perfect governance indicator will undoubtedly never exist.  Still, the production and use of more transparent governance indicators will better serve the needs of both external users and developing countries seeking to improve the quality of local governance.  Promising new developments in the “market” for governance indicators are on the horizon.

Uses and Abuses of Governance Indicators, OECD 2006

www.oecd.org/dev/publications/governanceindicators