MattAndrews

Governance through and after the financial crisis

Taking a break from indicators, I thought some readers may find a forthcoming set of papers in the journal Governance interesting. I am a contributor to this set, looking at how governance will be altered by the current crisis. I write a paper on what we could expect governance reform to look like. From an indicator perspective, can we expect mechanisms like Doing Business and the World Governance Indicators to have more or less influence? From a reform perspective, do we think there will be more or less deregulation, modernization according to international standards, privatization and the like? In asking these questions, one should also pay attention to new pressures and ideas. Will China and India emerge as places developing countries look to for fresh insights on governance? Or perhaps the lessons of east asian success stories will beckon more than they have and people will start asking about governance in Development States. I also ask whether developing countries will have more say in determining their reform trajectories, indicators, and the like than many believe they have had to date.
My other co authors ask even more interesting questions. Check it out. http://governancejournal.net/

Governance, outcomes and context: What we learn from boxing

My last post continued thinking about outcomes and governance. I am trying to see if we can tie governance indicators to outcomes, such that we have better construct validity of these indicators.

Basic ideas to date, and questions

I argued that this needs to be done in fields where we can focus on outcomes. Child health is one such field. I argued that we need a measure that captures outcomes citizens care about. Under 5 survival rates is my example. I argued that a second dimension of this outcome, costs, is also important. It is not a great outcome if all children are kept alive but it takes all your resources.

Putting all this together, the idea is that good governance in the child health arena will be reflected in high survival rates at low costs. Such outcome indicates that governments have taken the authority given to them by citizens to set up mechanisms and structures that produce welfare value to those citizens. These mechanisms will differ between places and we are not even getting into the detail of what they are...just whether they have delivered.

I made one additional adjustment. I said that we need to control for big contextual drivers that affect the expectations citizens might have of what outcomes should be--and the realities of delivering such. One could call these relevant indicators. In the health area, we know that levels of per capita income are such a variable. So, we need to compare wealthy countries with wealthy countries, poor countries with poor countries, and so forth.

This is where I got to in the last blog. I showed that when we do this we can see how well countries like the USA are performing relative to other wealthy countries (not well) and how well countries like Pakistan are performing relative to other poor countries (well). So, we have a contextually relevant measure of outcomes that tell us something about governance.

But does it? This is the question Alan Hudson asked and which is pregnant in my mind and I am sure many others. Alan raises two dimensions of the question. First, is the measure fully contextualized? There are contextual factors that matter--other than income--that we have not controlled for. Second, is the indicator capturing variations in 'governance'? If we are not fully controlling for context, and country outcomes vary because of contextual factors, aren't we jumping the gun in saying this is about governance?

Great questions. I think they raise empirical questions about measurement and theoretical and applied questions about what governance is. I don't think I will answer them completely here, but let me start. And let me start by going back to sports...

Boxing and governance: can we learn something

I have likened the indicator of income adjusted, costed survival rates as measures of the ability countries have to box at their income weight. They ask a lightweight boxer what his record is in the lightweight division. This is a good indicator of how well that boxer performs against appropriate opposition.

Such indicator is really different to conventional governance indicators. These indicators identify a set of characteristics in the overall best performers and then say these are the basis of good governance. Think of Doing Business indicators that emphasize deregulated industry, or World Governance Indicators that give countries credit for having things like meritoractic civil service systems and decentralized governments. To me, these indicators are akin to having a measure of 'good boxing' that looks at the weight, height and arm reach of a fighter.

This kind of indicator might suggest that good boxers are all over 200 pounds, 6 foot 2 and with an arm reach of 200 cm.  Any boxer that is less than 150 pounds, 5 foot 8 or with a reach less than 180 cm must be bad. Certainly the latter boxer would not succeed against the former, in what the industry calls a 'mis-match'. Like the one shown below.

It is not useful to say that taller, heavier men with longer arm reach will win bouts against significantly shorter, lighter men with less-long arms. I've had some of those scraps on the rugby field and I know they don't work out in my favor! The indicator does not capture how good the fighter is, just how different their basic attributes are--given some intervention in their past (like their birth).

Professional boxing knows this. So it controls for the most defining attribute--weight level--to try and give a better perspective on who is good and who is bad at boxing. Every boxer falls into a weight division and must compete with others in that division. Light middleweights are those weighing between 147 pounds and 154 pounds, for example. They tend to be between 5 foot 6 and 5 foot 11, and their arm reach is between 160 and 190 cm on average.

We know that a fighter is 'good' or 'bad' because of the record they have in their weight division. This is simply the number of wins compared with the number of losses. Floyd Mayweather is 5 foot 8, weighed in the region of 154 pounds in 2007 and 2008, and has a reach of only 183 cm. But he has a record of 42-0. Forty two wins, and no losses (according to wikipedia...I am no boxing genius). Tony Pep, a 6 foot 1.5 inch boxer from Canada, has a record of 43-10-1 (43 wins, 10 losses and 1 draw). One of his losses came against Mayweather.

Mayweather is a good boxer. Pep is less good--but not by any means bad.

Now, if we get to the heavyweights we do the same analysis. Wladimir Klitschko is 6 foot 6, weighs about 210 pounds, and reaches 206 cm with his arm. Wow. He has a fight record of 56 wins and 3 losses and is currently considered world champion. A good boxer.  Axel Schulz was also a heavyweight. Standing at 6 foot 3, he also weighed over 200 pounds and had an arm length of 193 cm. His record was 26 wins, 5 losses and a draw. Not a bad boxer, but not as good as Klitschko.

One wonders if Schulz would have beaten Mayweather. I am not sure if boxing aficionados will jump on me in saying I expect he would have. he just had more size. And in boxing size matters. But that does not mean he was a better boxer than Mayweather. Actually many believe that Mayweather is the best of all time, across all weight divisions.

All this to say that we need to compare like with like, controlling for the broadest factors that affect performance.  This is something we learn from boxing. And it works in governance indicators as well. The approach I have taken shows this.

• The United States is an income heavyweight that does less-well than the countries we can compare it to in the area of child health--its survival rates are just above average but its costs are way above average.
• Singapore is an income heavyweight that does really well when compared against its comparators (its survival rates are higher than average and its costs are lower than average).

See both in the two dimensional graph below, with the horizontal axis showing how many standard deviations all these rich countries are from the average rich country survival rate; the vertical axis shows how far the countries are from the average cost of producing this outcome.

Now, one may say that this does not account for all of the contextual influences on under 5 mortality rates and thus we cannot say "the USA child health sector is governed less-well than that in Singapore."  One would certainly be right in some respects.

Some contextual variables emerge as important.

• First, you will see that bigger countries tend to be located in the upper right quadrant with the USA (relatively high survival rates but relatively high costs as well). The lower right quadrant (with relatively high survival rates at relatively low costs) is in contrast dominated by smaller countries.  When I look at a single measure of outcome performance (as per the last blog), the top 25 child health countries average out with populations of 12 million. The bottom 25 have 31 million. The difference in averages is statistically significant (at 5%) suggesting that bigger countries have a harder time in this area.
• Second, the better performing countries tend to have higher degrees of population density. Statistical analysis suggests that ten times more people are located in equivalent land areas in the better performing countries than the poorer performing countries (again, a statistically significant difference in means).  So it seems that child health outcomes are easier to provide at lower costs in rich countries with smaller, more densely populated populations. Island states are the place to be!
• Third, you can see that the top right quadrant is dominated by the old guard of the OECD. This shows up in the stats. The average number of years' membership in OECD is 41 for the 25 worse performing countries. It is 9 for the 25 better performing countries. It is a statistically significant difference. I will look to interpret it in future posts but some possibilities are: Rich countries that are more newly rich have better child health performance than others; rich countries with newer child health service delivery mechanisms perform better than others; rich countries with younger populations perform better than others.
• Fourth, if we look at the data we find that countries that perform better than others have lower numbers of doctors. The top 25 performing rich countries have about 2.5 doctors per 1,000 while the bottom 25 performers have 3.2 doctors per 1,000. So there is something here about the size of the medical profession (that could be related to the third point on OECD membership and also to the size and spread of population in the first and second points above).
• Fifth, I looked to see if there is any variation between conditions of children in these countries, and it turns out that the better performing countries have lower levels of undernourished children (5 per 1,000 as compared with 5.3 per thousand).

Now one may say we should control for all these factors--and a bunch of others like gini coefficients, number of years kids are in school, teenage pregnancies, and a range of other factors we think or know impact on a country's performance. One may say that we only get to governance issues once these have been controlled. 

So, without taking a firm position, let me say why this may not be a great idea. I will use the boxing metaphor to help me.

• First, boxers in various divisions have something in common--they fall into a particular weight group. Beyond this, they have many things that are not in common. Some heavyweights are taller than others, for instance.
• Second, these variations matter. If we went to do a statistical analysis explaining why some boxers win the heavyweight championship and others do not, we are bound to find that height matters. Apart from Mike Tyson, there has not been a heavyweight champion in the past few decades who is shorter than 6 foot 2 (he stands at 5 foot 10, I believe).
• Third, heavyewights who are shorter than 6 foot 2 still have to compete with other heavyweights. They get no special 'control' to help explain that their losses were against taller opponents. This may have helped David Ruiz improve his record from 44 wins and 9 losses...given 2 of the losses came in decisions against Nikolay Valuev who stands at over 7 ft tall and weighs over 320 pounds (see picture). His record could have been 44 wins, 7 losses, 2 losses against the 7 ft tall guy. No. It was 44 and 9. His context was controlled for in terms of weight, and beyond that he was simply expected to compete. (In fact he did compete, with the losses being controversial...)

• Fourth, one of the reasons why boxing allows someone like Ruiz to be compared and competitive with someone like Valuev is because, when one gets into the ring, factors other then height matter. Ruiz mastered techniques that fighters like Valuev did not. Mike Tyson had aggression, speed and power that many taller fighters lacked. Some fighters have more organized management teams, cut-men in their corners, or preparation approaches. 
• Fifth, many of these other factors are variables that the fighters themselves can control. The techniques they adopt, the number of hours they put in at the gym, their selection of manager. They actually need to control and manage these factors in relation to the factors they cannot control. If a tall fighter wants to use his height as an advantage, he should choose a specific technique, for example. If a fighter has natural speed he needs to engineer a fighting technique that works towards this advantage.
• Sixth, good fighters are the ones who put all the pieces together. They build on their different natural strengths by adopting relevant techniques etc.

I would like to suggest that these sixobservations are important for our thinking about governance:

• Put together, they tell me that there are many factors that an econometric analysis will show explains which rich countries are more likely to provide good child health outcomes.
• Some of these are natural or entrenched contextual advantages  or disadvantages that countries cannot do that much about.  The United States cannot be a small island state like Singapore.
• But there are defining factors that are dynamic and reflect strategic choices countries make to do better. Countries can do something about the medical technologies they adopt, for instance, or the degree to which their children are under nourished.
• The choice or dynamic action is contingent on the natural factors. Countries with large and deconcentrated populations need to adopt different mechanisms to improve their child health performance than Singapore does.
• Governance is about whether governments use their authority to make dynamic adjustments that fit the natural contexts in which they are found. These adjustments should counter the contextual constraints and build on the contextual strengths in place. The USA does not get a pass on poor performance because it is large and dispersed. Good governance is achieved in the USA when it makes the policy, organizational, etc. decisions needed to improve its child health performance given its context. 

 In this analysis, the quality of governance is indicated--not necessarily measured--by the outcomes in evidence. They tell us if the country is performing at, above or below expectation (given its income level), which is an indication of the degree to which authority is exercised in such a way to build on natural strengths and compensate for natural constraints.

What do you think?

The USA lags Pakistan and the Comoros in its governance of child health

CONTEXTUALLY CONTROLLED OUTCOMES GIVE ONE A DIFFERENT PICTURE OF GOVERNANCE

My last post explored the idea of a two-dimensional approach to measuring governance in the child health area. A couple of comments agreed that this is appealing from a policy perspective. It shows visually where welfare is being produced and lost between the quantity and cost elements of the outcome. This is something that you won't currently find in any approach to governance (If I am wrong, please tell me...I'm always looking for new measures).

I also believe that a one-dimensional governance indicator might be calculated through the proposed approach, however, and be something for consideration. It would be a single measure that one could point to in referring to the overall governance outcomes of a field or sector. Again, it does not reflect on governance processes--just the degree to which governments exercise their authority in a way that ensures children stay alive to 5 years and that does not crowd out other outcomes because of excess expenses.

This would essentially involve combining the two elements introduced in my last blog posting to see how far an individual country departs from its income group on both survival rate and cost measures. The combined deviation-from-mean scores are shown in the figure below. The z-score for cost in each country has been subtracted from the z-score for survival rate; for the USA this results in 0.13-2.64=-2.51. The USA fits into the area to the left of the vertical line, which reflects increasingly weaker outcomes, welfare for citizens and hence governance.

   

The vertical axis in the above figure is the same as that used in the figure below (which illustrates World Governance Indicator scores). This shows that the new indicator is not biased by a country’s income group (as most governance indicators are). Actually, the focus on income-group controlled survival rates and costs leads one to identify three lower income countries as having the (relatively) best governance in the 181 country sample (Comoros, Pakistan and Bangladesh). The worst ten performers come from an assortment of income groups, including higher income (Equatorial Guinea and the USA), upper middle (South Africa and Gabon), lower middle (Kiribati, Timor Leste, and Djibouti) and lower income (Sierra Leone, Rwanda and Burkina Faso).

WGI government effectiveness scores for 181 countries, 2007

 

Readers might ask the obvious questions: is governance in the child health sector really better in Pakistan and the Comoros than it is in the United States?

The answer is yes, given the different contexts of these countries.

While Pakistan and the Comoros have lower under five survival rates than the USA, these survival rates are high relative to the income group of which they are a part, and the cost of generating these survival rates is relatively low, given their comparators. The USA has average survival rates, relative to its high income reference group, produced at very high costs relative to its peers. These high costs cause the United States to score substantially below the high income league averages on the combined u5mr/cost measure—as shown in the top figure. 

Put differently, Pakistan and the Comoros  may be lightweights but they box excellently at that weight level. The USA is a heavyweight that is struggling in its weight division...

Observers might argue that the method adopted as a basis for this indicator is biased against wealthier countries, given that these countries are all abutting the upper limit of child survival (100%) while costs have no such limit and the health care costs in wealthier countries are likely to be higher than in others. The backward tilt in the top figure may reflect this problem, with fewer wealthier countries able to score a combined high positive standard deviation and a large group of (mostly OECD) wealthier countries scoring in the negative standard deviation area.

There is variation in the high-income group of countries, however, and some countries (like Singapore) score better than their comparators in both the survival rate and cost data. Better performing countries in this high income group all have low health care costs per capita, as well, and on the basis of our work we argue that costs may actually have a practical, unofficial upper boundary. Eighty-six percent of the high income countries have costs below 10% of GDP, which we would suggest seems to emerge as a reference point to think about as some kind of comparative limit. (This is calculated on the basis of per capita health spending in 45 OECD and non-OECD countries. All of the wealthier non-OECD countries have per capita figures below 10% of GDP and 83 percent of the OECD countries are below this figure too. A total of 93 percent of the 178 countries in our data set have per capita health spending below 10% of GDP.)

The United States is the only high income country to score more than two standard deviations below its peers on the overall indicator. We suggest that it could learn from a host of other high income countries how to govern its child health arena better (especially countries like Japan and Korea, both of whom are more than one standard deviation above the peer mean). These countries appear to have better governed child health fields, where comparatively strong under-five survival rates are achieved at relatively low costs. This is not to say that the governance structures here have cultural, political or other transferability, but just that they appear to offer an example of good practice within the United State’s income league and our indicator points to lessons the USA could learn from them.

In future posts I will relate the performance of higher income countries with other higher income countries,  and so forth, and discuss how this comparison might be used to test for governance impacts on relative outcomes.

 

 

DO COUNTRIES BOX AT, ABOVE OR BELOW THEIR WEIGHT? Contextually-fitted outcome measures to drive thinking about governance

OUTCOMES ARE USEFUL AS GUIDES FOR GOOD GOVERNANCE

BUT ONLY IF WE CONTROL FOR CONTEXT, BEING REALISTIC ABOUT EXPECTATIONS AND DRAWING LESSONS FROM RELEVANT COMPARATORS

Outcomes as a doorway to better governance indicators

Yesterday I did a post on creating outcome measures that could be useful in facilitating focused governance indicators. I focused on child health and suggested that we look at the survival rates of children to see where countries are experiencing good or bad governance. I took some steps:

First, I argued that we need a theoretical frame for the indicator that ties principals to agents in the production of welfare. Hence the statement,

Citizens grant public organizations the authority to ensure optimal provision of child health care, in whichever way appropriate, reflected in the cost efficient production of the highest possible survival rate of all children under five. Governance systems are ‘good’ when they ensure relatively high survival rates at relatively low average cost.

Second, I suggested that we construct a measure that reflects effectiveness (what level of service is produced, for example) as well as equity (how many citizens have access to the service) and cost (how much do citizens have to pay). I argued that the last consideration is particularly important because efficient production of one good allows citizens resources to consume other goods (further improving welfare).  Inefficiencies in one organizational field will impact effectiveness in others.

Following these steps, I created a two-dimensional measure that allows one to see the zones in which countries are performing (see figure 1 below). There is a (potentially) good governance zone, in the bottom-right hand corner of the figure (see below). Here countries have child survival rates above the global average with costs below the global average. There is also a (potentially) poor governance zone, in the top left corner, where countries are producing survival rates below the global average but spending more than the global average. There are two additional zones that suggest mixed performance (high survival rates at high costs or low survival rates at low costs).

Figure 1 from yesterday: Different countries, different outcomes

 

This is not a governance indicator. It is a two-dimensional measure of outcomes that starts to raise questions about governance. We might wonder if countries in the bottom right zone exhibit specific management or institutional or organizational mechanisms that others do not have, for instance. Perhaps country performance can help us say something about governance.

I asked what more information we needed before saying this, however. Today I will address one set of such issues. Put simply, we need to consider other factors that might explain outcomes. Contextual factors may dominate governance in explaining how well countries perform. We must be careful not to move to a discussion of 'governance' making a difference when we don't actually know if it does.

Many governance indicators have not controlled for contextual factors, and this undermines their construct validity. I discussed this a few weeks ago and related to studies by Melissa Thomas and Kurtz and Schranck. These authors argue that many governance indicators are really just different measures of economic development. World Governance Indicators, in particular, have extremely high correlations with country GDP per capita. We do not know if the WGI's are just capturing a country's level of development or other factors driving social, political and economic development. Consider the graph below, which shows that WGI scores are systematically higher in higher income country groups.

 

Controlling outcome measures for context: What results should we expect?

Some contextual factors impact outcomes in a reliable fashion and muddy the study of governance. We know, for example, that income levels have a significant impact on mortality rate statistics (Pritchett and Summers 1996; Filmer and Pritchett 1999), and that even income scores from 25 years ago can explain inter-country differences in under-five mortality rates.

The fact that Pakistan has a lower survival rate for under five year olds than Singapore may thus be more about its level of development than its governance quality. Indeed, only 3 of the 64 countries in the bottom right ‘good governance’ quadrant of yesterday's figure are low income countries (Vietnam, Uzbekistan and the Kyrgyz Republic). Fifteen out of 24 countries in the top left (inferior governance) quadrant are low income, with the highest income country in this quadrant being from the upper middle income country group (South Africa).

Higher income countries are also disadvantaged by development status, given that health care costs per capita are much higher in these countries. Higher income countries account for 32 out of the 57 countries in the above figure's top right quadrant (better than average survival rates at higher than average costs). This could imply higher costs (and hence lower welfare) in these countries, or a health care product that ensures significantly more than survival for under-fives (perhaps because more developed citizenries demand more than just survival and also because health care cost indicators used in relation to child health include a cross subsidization of health costs for the aged).

These kinds of dependable contextual variations are important to consider in both assessing governance through outcomes and in identifying where different countries should look for lessons on how to improve. Like must be compared with like as an approach to control for context in governance indicators.

Roger, Jerrett and I took a simple approach to doing this, starting first by observing which variables do have a dependable influence on the outcome in question. As discussed, in the case of child health, this variable is the nation’s income level (Filmer and Pritchett 1999). Figure 2 below shows just how much variation there has been in mean scores for survival rates over the years, across four ‘income leagues’—lower, lower-middle, upper-middle and higher (based on United Nations  classifications).

Fig. 2. Average survival rates across ‘income leagues’, 1960-2005

 

The figure shows that average under five survival rates in 2005  among lower income countries were lower than the survival rate average in higher-income countries in 1960. Figure 3 shows that the deviation across income leagues is also different, being higher in the lower income group. Higher and upper-middle income groups have seen greater convergence around high under five survival rates.

Fig. 3. Standard deviation in survival rates across ‘income leagues’, 1960-2005

 

Given such data, we should not expect that a lower income country will score a survival rate as high as a higher income country, even if the lower income country has the best form-basedgovernance in the world. Wealthier countries will also likely have higher per capita health costs (even as a proportion of GDP) regardless of whether they govern their systems well or not. 

Given these observations, we create a two-dimensional governance outcome measure that controls for income leagues present across the world, using the United Nations Classification as a guide.

The underlying argument is simply that governance in the field of child health is best assessed through outcomes when comparing lower income countries with other lower income countries, and so forth. It is still comparative, but the comparison is now within income groups and not across all countries. So we ask how far each country’s survival rate and cost scores are from the averages in their league, measured in standard deviations to allow comparison across all countries (applying an approach similar to Anderson and Morrissey 2006 and Lawrence 2006).

Z-scores are calculated for all of the countries, using the score for each country (of the survival rate and cost), and the mean and standard deviation (for both measures) for the relevant country set (low income, lower middle income, upper middle income and higher income (OECD and non-OECD)).  

Figure 4 shows the results, with the USA survival rate ending up 0.13 standard deviations above its high income country group survival rate mean, and 2.64 standard deviations above the high income country group cost average. South Africa stands -2.65 standard deviations below its comparator group (high middle income) in regards to survival rates, and is also 1.12 standard deviations above average mean costs in this group.further research into why outcomes vary between countries, and will help to focus research on real governance and government impacts.  

Fig 4. How outcomes look when controlling for expectations

 

This graph shows where governance systems ensure the provision of child health quality at, above or below their income level; much as one might asks whether a boxer boxes at, above or below his weight level.

As in Figure 1, the lower right-hand quadrant shows those countries that ‘box above’ their income levels by producing higher survival rates than the average of their income group (at zero, the vertical line) at lower costs than the average of their income group (the horizontal line). One should note that some countries change their position given the contextual control:

• Pakistan moved from the lower left quadrant in Figure 1 to the lower right quadrant in Figure 4, for example (because its survival rate was lower than the overall world average but higher than its comparator lower income group average). Pakistan’s performance is below average in comparison to the entire world, but above average when compared with countries in its income group. Much like a middle-weight boxer may routinely lose against a good heavyweight but be the best of the middleweights.
• The USA “boxes at its income level” in terms of the survival rate produced (0.13 standard deviations above the average of higher-income countries) but it “boxes below its income level” in terms of cost of production, with costs over 2 standard deviations higher than the high-income country average. The USA is an economic heavyweight boxing at the middleweight level because of high health care costs. Using the language of governance, we conclude that authority in the US child health field is not being exercised in a manner that maximizes welfare (given the high costs of producing services).
• The situation is more dire in South Africa, where weak governance in this sector is reflected in weak service delivery (lower than average upper middle income group survival rates) and high costs (higher than average upper middle income group cost per capita). South Africa may be an economic middleweight, but its child health care field struggles to compete as a welterweight.

The approach to measuring governance in Figure 4 helps one to identify the top contenders or better governed countries (in this children’s health field) in all income groups:

• 16 low income countries fall into the bottom right quadrant: Pakistan, Comoros, Mauritania, Bangladesh, Eritrea, Madagascar, Papua New Guinea, Lao PDR, Uzbekistan, Kenya, Yemen, Tajikistan, Nepal, Tanzania, Vietnam, and The Gambia.
• 24 lower middle income countries are in this quadrant: Indonesia, Philippines, Thailand, Algeria, Vanuatu, Syrian Arab Republic, Sri Lanka, Azerbaijan, Peru, Cape Verde, Mongolia, Samoa, China, Tonga, Ecuador, Morocco, Armenia, Tunisia, Colombia, Guatemala, Albania, Dominican Republic, Egypt, and Honduras.
• 15 upper middle income countries are also in the good governance area: Libya, Malaysia, Fiji, Mauritius, Venezuela, Romania, Russian Federation, St. Kitts and Nevis, Chile, St. Lucia, Lithuania, Latvia, St. Vincent and the Grenadines, Poland, and the Seychelles.
• And 10 high income countries box above their weight level: Brunei Darussalam, Kuwait, United Arab Emirates, Singapore, Bahrain, Estonia, Cyprus, Korea, Slovak Republic, and the Czech Republic..

It is interesting to note that while we have not controlled for the income bias completely, the above lists show significant variation in income levels amongst the strong performers in each group.

• Six of the fifteen low-income countries listed have per capita incomes below the average of low-income countries. (Using GNP per capita calculated according to the Atlas Method for 2005, available in the World Development Indicator database; Eritrea, Madagascar, Tajikistan, Nepal, Tanzania, and The Gambia  have income levels below the low-income group average.)
• Five of the top ten lower-middle income countries have per capita incomes below the average for their group. (This includes three of the top six performers; Indonesia, the Philippines and Sri Lanka.)
• Four of the top seven in the upper-middle income group also have per capita incomes below their group average. (Fiji, Venezuela, Romania and Russia).
• All ten high income countries boxing above their weight level had per capita incomes below their group averages. (Bahrain, Brunei Darussalam, Cyprus, Czech Republic, Estonia, Korea, Kuwait, Singapore, Slovak Republic and the United Arab Emirates.)

A number of factors emerge as intuitive answers to questions about why different countries fit into these different ‘governance quadrants’. Many of these are not about the processes of governance but rather about the governance context:

• It seems, for example, that country size might matter in influencing governance outcomes (Singapore has better survival rates at lower cost than the United States, a high-income comparator). Is it easier to govern a small health sector cost effectively than a large one?
• Newly-rich countries also seem to do better on this indicator than their other high-income comparators, producing high survival rates at much lower costs. Do newly rich countries have a leapfrogging benefit, whereby they build capacities and relational mechanisms on the basis of the latest technology and lessons from older wealthier countries, who are locked into their more outdated systems?
• Countries with higher Gini coefficients, relative to their income league, seem to perform differently, perhaps reflecting the complexities of governing unequal countries. The USA has the highest Gini for high income countries, and a much higher cost of producing health care; countries like South Africa might argue that their inequality puts them in a higher income league than appropriate (upper-middle) which results in an unfairly harsh benchmarking.
• Higher-income countries seem to do better when there is a greater direct public sector expenditure outlay, which may speak to the complexities of governing market-driven systems. The high cost of a private sector-led US system stands in contrast to other lower cost government led systems in the OECD, for example, suggesting different costs drivers and abilities to contain cost in these systems.

These and other second-stage observations provide important avenues for further research into why outcomes vary between countries, and will help to focus research on real governance and government impacts.  I will explore these more in coming weeks but wonder what you think of the approach in general?

 

Good governance and survival of our children: an example of outcomes measures as a route to thinking about governance

I have been arguing that good governance is about producing outcomes.

This means having the best possible systems etc. to ensure that a group of agents use the authority given to them by a group of principals to maximize the welfare of those principals. One commentator on Twitter called this philosophical. Maybe. Pretty practical if you ask me. And it disciplines the focus of governance and governance indicators. Consider the following principles for such discipline:

1. If you cannot say who the principal is, or who the agents are, or what the welfare outcome is, you don't have the makings of a testable governance indicator.
2. If you don't have evidence about the link between processes, systems, rules in the indicator and the outcome...you don't have a valid indicator.

Anyway. Yesterday I suggested that step 1 of developing an ouctome based approach to governance involved thoughtfully selecting outcomes. I asked if any readers could identify areas where they would be interested to see application of an outcome based approach to governance indicators. I got some interest in child health, which works for me because I have done research in the area.

So: Step 2 in developing the outcome based approach to think about governance is to decide on appropriate measures of the outcome (the anchor for all your work). I have two sets of criteria for this: First, think of the different dimensions of the measure; Second, craft the story as to why this is potentially about governance (the basis for testing construct validity). 

Given such approach, I believe that outcome measures are field specific (so they are not just attributable to one organization, like government, but are the focus of one set of related organizations). Child health is a good field.

I believe that measures should also be constructed to reflect (1) effectiveness (what level of service is produced, for example) as well as (2) equity (how many citizens have access to the service) and (3) cost (how much do citizens have to pay).

The last consideration is particularly important because efficient production of one good allows citizens resources to consume other goods (further improving welfare). Inefficiencies in one organizational field will impact effectiveness in others. (So, if a country is performing great in one outcome area but uses all its resources to do so, it crowds out performance in other areas...not a good governance outcome).

I worked with Roger Hay and Jerrett Myers to present under-five mortality rates (u5mr) as an interesting example of a governance outcome variable in the child health sector. The Millennium Development Goals embed targets for this outcome, indicating both its importance to social welfare in development and the general perspective that it is influenced by publicly-exercised authority (given that MDG commitments involve governments). Buckley (2003) notes that the infant mortality rate is “regarded as one of the most revealing measures of how well a society is meeting the needs of its people.”

Performance on the indicator is also understood to reflect both the level of service provision and equity of such provision, with more equal countries tending to have better u5mr statistics (all else being equal) than others (see Filmer and Pritchett 1999). Governance is cited as an influence on this rate as well (Baldacci et al. 2008; Lewis and Musgrove 2008). From a theoretical perspective, we argued that governance is reflected in this indicator via the following rationale:

Citizens grant public organizations the authority to ensure optimal provision of child health care, in whichever way appropriate, reflected in the cost efficient production of the highest possible survival rate of all children under five. Governance systems are ‘good’ when they ensure relatively high survival rates at relatively low average cost.

This statement becomes an important consideration for thinking about construct validity. I wonder how many indicators we have out there that prohibit a clear statement about potential causality between governance systems and multi-dimensional outcomes?

The following figure shows what the ouctome measure looked like for 181 countries in 2005. The horizontal axis shows the survival rate for children under five years of age in these countries (calculated simply as 1-u5mr/1000).Higher scores indicate more welfare for citizens. The vertical axis shows a proxy for the average cost of producing these services, drawn from the proportion of per capita GDP spent on health and showing the percentage of per capita GDP required to ensure full survival of children under five, given 2005 spending on health care. Figure . Examining governance through u5mr data for 181 countries

 

The cost proxy is obviously problematic, as some costs related to basic child health are not captured at all and other costs captured here are not dedicated to addressing basic child health. The proportion of per capita health spending actually absorbed in ensuring child survival is also likely different for different countries—lower in wealthier countries with older populations who drive up health costs.  I'm happy to discuss some of these issues as they emerge and acknowledge that a better proxy is needed. But as a basic indicator I argue that lower relative costs indicate more welfare for citizens—in that countries have more money to allocate on building welfare in other areas.

Given this thinking, countries in the bottom right quadrant, like Indonesia, Cyprus and Singapore, have higher survival rates than the global average (94.7%) and lower costs than the global average (6.7% of GDP per capita). This is potentially a zone of relatively good governance outcomes in the child health sector, where authority is exercised across service delivery processes and relationships in a manner that results in strong outcomes at relatively low cost. Countries in the top left quadrant, like Sierra Leone, Rwanda, Timor Leste, Zimbabwe and South Africa, are producing lower than average child survival rates at higher than average costs. This, we argue, is potentially a zone of  relatively inferior governance, reflected in a failure to exercise authority in a manner that ensures contextually appropriate levels of child survival.

This measure raises more questions than it answers, but this is a good thing for  those of us interested in governance. We need to remember that there are more questions than answers. What else do we need to do to the measure before we get to ask if governance makes a difference? What do we need to control for? How could we do this? When do we ask about which governance processes matter, and how do we do this?

Choosing Outcomes To Shape Governance Indicators Around

Today's Question to Guide the Design of Governance Indicators: Which Outcomes Should Government Be Engaged in?

I'm back in Boston and into thinking about governance, governance indicators and outcomes. I have replied to a couple of great conments on past posts--thanks to those who are engaging so thoughtfully.

One of the comments, by the ever-sharp Clay Wescott, suggested that we need a step by step approach to connecting governance indicators to outcomes. I agree. I think my starting step is even earlier than what Clay proposes, however. I think we need to start by asking what outcomes we have in mind when we think about governance. Given we are thinking about governments in particular, the question I ask is: What outcomes do citizens commonly authorize governments to help facilitate?

This question emerges from the assumption that principals delegate authority to agents in order to achieve outcomes. Mirroring basic theories of public finance, I argue that citizens delegate authority to governments when faced with restrictive costs or complicated problems of cooperation and coordination. I could extend my perspective to sociological theory on the state, agreeing that sometimes citizens give governments authority because they beleive it is appropriate to do so (regardless of the presence of cost or coordination-type problems).

I am arguing that citizens are still looking for outcomes in return for the delegated authority, however, no matter why they give such. Further, the quality of public sector governance is reflected in whether public organizations exercise authority in a way that facilitates outcome and value production.

This does not mean that the governments produce services directly. They could regulate a sector. They could subsidize a sector. Etc etc.

Given such thinking, I suggest that public sector governance indicators should focus on domains where most would agree that citizens accord governments authority to influence outcomes. This could include “public goods” interpreted narrowly (such as defense) and more broadly (maybe the Millennium Development Goals (MDGs)).  I wonder what areas quickly come to mind: Perhaps macroeconomic management, policing and defense, education, health care, and environmental protection.

I would love to see a top 5 from readers. What outcomes do we think governments around the globe are authorized to  facilitate?

I think the question is important and takes us from dominant approaches to governance that have assumed that 'small' or 'limited' governance makes sense--regardless of country or outcome being considered.  It calls us  into the debate on the functional role of government--not necessarily its form. 

As an example, in the coming weeks I will be discussing an area in which governments are always involved--child health--and an indicator that cannot be achieved without the enaggement of governments--child survival to five years old.  What other examples would you like to explore?

Creative governance through rapid results

I've been in the Kalahari desert discussing Africa's growth and governance challenge. I will be back to indicators in a day or two when back in Boston. Meanwhile, I thought you might be interested in an article about rapid results, and my friend Nadim Matta. I have seen their work in action and use similar methods in some of my interventions as well. I think of it as finding functional governance solutions through dynamic problem solving. A great article and some nice discussion: http://opinionator.blogs.nytimes.com/2011/09/29/making-change-happen-on-a-deadline/#preview