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The Good Governance Indicators of the Millennium Challenge Account: How many dimensions are really being measured

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  • Knoll, Martin
  • Zloczysti, Petra
Abstract
This paper assesses the validity of the perception-based governance indicators used by the US Millennium Challenge Account (MCA) for aid allocation decisions. By conducting Explanatory and Confirmatory Factor Analysis of data from 1996 to 2009, we find that although the MCA purports to measure seven distinct dimensions of governance, only two discrete underlying dimensions, the 'participatory dimension of governance' and the 'overall quality of governance' can be identified. Our results also show that some of the doubts that have been raised concerning the validity of perception-based governance indicators are less warranted when the indicators are applied exclusively to developing countries.

Suggested Citation

  • Knoll, Martin & Zloczysti, Petra, 2011. "The Good Governance Indicators of the Millennium Challenge Account: How many dimensions are really being measured," Discussion Papers 2011/2, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:20112
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    2. Michener, Gregory, 2015. "Policy Evaluation via Composite Indexes: Qualitative Lessons from International Transparency Policy Indexes," World Development, Elsevier, vol. 74(C), pages 184-196.
    3. Uddin, Md Akther & Ali, Md Hakim & Masih, Mansur, 2017. "Political stability and growth: An application of dynamic GMM and quantile regression," Economic Modelling, Elsevier, vol. 64(C), pages 610-625.
    4. Gisselquist, Rachel M., 2013. "Evaluating Governance Indexes: Critical and Less Critical Questions," WIDER Working Paper Series 068, World Institute for Development Economic Research (UNU-WIDER).
    5. Knoll, Martin, 2013. "The heavily indebted poor countries and the multilateral debt relief initiative: A test case for the validity of the debt overhang hypothesis," Discussion Papers 2013/11, Free University Berlin, School of Business & Economics.
    6. Lebovic, James H., 2014. "The Millennium Challenge Corporation: Organizational Constraints on US Foreign Aid, 2004–11," World Development, Elsevier, vol. 58(C), pages 116-129.
    7. Rodion Skovoroda & Shaun Goldfinch & Karl DeRouen & Trevor Buck, 2019. "The Attraction of FDI to Conflicted States: The Counter-Intuitive Case of US Oil and Gas," Management International Review, Springer, vol. 59(2), pages 229-251, April.
    8. Hosein Mohammadi & Naser Shahnoushi & Marzieh Ronaghi, 2017. "The Effects of Governance Indicators on Per Capita Income, Investment and Employment in Selected Mena Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(2), pages 211-229, Spring.
    9. Shaun Goldfinch, 2015. "Property rights and the mystery of capital: A review of de Soto’s simplistic solution to development," Progress in Development Studies, , vol. 15(1), pages 87-96, January.
    10. Huck-ju Kwon & Eunju Kim, 2014. "Poverty Reduction and Good Governance: Examining the Rationale of the Millennium Development Goals," Development and Change, International Institute of Social Studies, vol. 45(2), pages 353-375, March.
    11. Mundle, Sudipto & Chowdhury, Samik & Sikdar, Satadru, 2016. "Governance Performance of Indian States 2001-02 and 2011-12," Working Papers 16/164, National Institute of Public Finance and Policy.
    12. Ward, Hugh & Dorussen, Han, 2015. "Public Information and Performance: The Role of Spatial Dependence in the Worldwide Governance Indicators among African Countries," World Development, Elsevier, vol. 74(C), pages 253-263.
    13. Rachel M. Gisselquist, 2013. "Evaluating Governance Indexes: Critical and Less Critical Questions," WIDER Working Paper Series wp-2013-068, World Institute for Development Economic Research (UNU-WIDER).
    14. Yu Hao & Chun-Ping Chang & Zao Sun, 2018. "Women and corruption: evidence from multinational panel data," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(4), pages 1447-1468, July.
    15. Stritzke, Susann & Trotter, Philipp A. & Twesigye, Peter, 2021. "Towards responsive energy governance: Lessons from a holistic analysis of energy access in Uganda and Zambia," Energy Policy, Elsevier, vol. 148(PA).

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    More about this item

    Keywords

    Aid Allocation; Governance Indicators; Factor Analysis; MCA;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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