Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/45376 
Year of Publication: 
2011
Series/Report no.: 
Diskussionsbeiträge No. 2011/2
Publisher: 
Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft, Berlin
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.
Subjects: 
Aid Allocation
Governance Indicators
Factor Analysis
MCA
JEL: 
C38
F35
O10
O51
Document Type: 
Working Paper

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