THE QUALITY OF GOVERNMENT CA FOSCARI INTERNATIONAL LECTURE

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1 THE QUALITY OF GOVERNMENT CA FOSCARI INTERNATIONAL LECTURE Andrei Shleifer December 12, 2012

2 1 Richer countries almost always have better governments Less corrupt More efficient Quality of government improves with development and education But why?

3 SOM DJI ERI NER SDN SWEDNK FIN NLDCAN CHE NOR AUT IRL QAT JPN GBR CHLUSABEL URYFRA ARECYP EST SVN ISR BTNBWA PRTESP CPV CRI OMN MUS POLKOR BHR LTU KWT JOR SAU CZE HUN NAM TURMYS GHA HRV MKD LVA SVK TUN RWA CHNSLV BRA BGR GEO ITA COL GRC CUB MWILSO BFA GMBGTM IND MAR PER THA TTO PAN SER ROU SWZ BEN DOM EGY LBR LKA JAM SEN MEX ETH MLI MOZ SLB TZA GUY MDA BOL GAB IDN ARG KAZ BGD MDG VNM AZE ARM MNG ECUBLR CAF CIV PAKSLE MRT NIC HND LBN KHMCMR COM TCD GNQGNBGIN NPL NGATGOUGAPHL SYR YEMLAO KENTJK IRN AGO KGZ PRY UKR RUS VEN LBY BDI IRQ MMR UZB NZL AUS Education N = 157; coef = 0.420, (robust) se = 0.042; P> t = 0.000; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: TI and UNESCO 2

4 NER DJI ERI SDN SWEFIN AUT DNKNOR NLDCAN CHEGBR IRL USAFRA BEL CHLJPN CYPEST ESP CZE PRTSVN KOR QATMUSLVA ISR HUNLTU OMNBWA POL URY CPV CRI KWT GRC MYS SVK BHR ARE ITA NAM BTN HRV JOR TUR SAU GHA BRAROU TUN EGY BGR BFA MWI IND LKA MAR THA CHN COL MKD GEO PAN LSO RWA TTO SENMLI UGA GMB GUY MDAARM SER MOZ TZA SWZ VNM GAB JAMMNG PHL SYR PERIDN MEX ARG KAZ CUB BGD ETH BEN LBN PAK SLB MRT AZE DOM LAOMDG NIC HNDSLV RUS UKR SLE TGO IRN PRYFJI NPL YEMKHMCMR COM GTM KENLBR BOLBLR LBY AGOBDI CAF CIV ECU GNQNGA TCDGNB GIN TJK UZB KGZ MMR IRQ VEN NZL AUS SOM Education N = 158; coef = 0.212, (robust) se = 0.018; P> t = 0.000; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: WB and UNESCO 3

5 NERDJI ERI CAN CHE BHRCHL DNK IRL MUS USA CYP NLDEST FIN GBR AUT JPN OMNARM QATGEO CZE SWE BWA BEL LTU CRI SLV COL JOR NOR PER SVKISR URYKOR ESP HUN CPVKWT MYS TTO MEX BGR JAM PAN SAU ARE LVA ROU FRA BFA GTM MDG NAM RWA TURTHA POL PRTSVN UGA AZE DOMKGZ PRYHRV KAZ KHM GHA MAR BTN EGY FJI GRC ITA CIV BEN GMBKEN NIC SWZHND LBN MNG MWI MLI NGAMOZ BRA GAB PAKSEN TZA BGD IND MDA PHL LKA SERTUN IDN YEM CMRCHN ARG CAF ETH GNB MRT TJK LAOVNMSYR SLE BDI GUY BOLRUS GNQ BLR TCD AGO GIN LSO TGO SLB LBR UZB ECUUKR COM IRN VEN LBY AUS NZL CUB Education N = 152; coef = 1.808, (robust) se = 0.263; P> t = 0.000; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: Heritage Foundation and UNESCO 4

6 NER DJI ERI SDN DNK FIN SWE AUT CAN CHE NLD HKGNOR BEL CYP GBR JPN USAFRA CHLEST ISR IRL KOR MYS CZE PRTSVN QAT ESP MUS ARESVK BTNBWA BHR HRV LVA HUN POLLTU OMN URY GRC ITA CRI TUR TTO GEO CHN NAMKWT BRA COL JAM GHA IND CPVSLV BGR JOR MEX PANTUN THA MARGUY PHL RWA ARM PER LKA SAU MKD IDN SERROU ARG CUB ETH LSOVNM KAZ MWI EGY LBN BEN MOZ BOLRUS BFA SEN TZA KEN SWZ UGA IRN GMBGTM DOM HND MDA SYR KGZECUMNG PAK BGD NPL KHM FJI MLI CMR MDGAZE UZB MRTLAO GAB UKR SLB GNB NIC TJK PRY YEM AGO GIN BDI VEN SLE NGA BLR IRQ CAF CIV LBR LBY TGO TCD GNQ MMRCOM AUS NZL SOM Education N = 159; coef = 0.227, (robust) se = 0.016; P> t = 0.000; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: WB and UNESCO 5

7 6 Usual explanation: democracy People vote out corrupt and incompetent politicians But the quality of government improves with education / development in non-democracies as well

8 QAT SOM ERI SDN ARE OMN BHR KWT JOR SAU TUN RWA CHN CUB MAR BFA GMBSWZ EGY TZA KAZ MDG VNM AZE BLR CAF CIV MRTTGO UGASYR YEM CMR IRN GNQ AGO LAO TJK VEN LBY TCD UZB MMR Education N = 46; coef = 0.194, (robust) se = 0.052; P> t = 0.001; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: TI and UNESCO 7

9 ERI SDN QAT OMN KWT BHR ARE JOR SAUTUN BFA MAR EGY CHN RWA UGA GMB TZA SWZSYR VNM KAZ CUB MRTLAO TGO MDGAZE IRN FJI YEM CMR BLR LBY CAF CIV GNQ AGO TJK UZB TCD MMR VEN SOM Education N = 47; coef = 0.105, (robust) se = 0.032; P> t = 0.002; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: WB and UNESCO 8

10 Not a completely obvious issue 9 Take corruption With Development Opportunities improve Regulations increase Yet corruption decreases

11 In this lecture, two additional theories 10 Complaining Educated people complain, and complaints lead to improved public conduct Productivity Government is like any other business: it is more productive in richer countries

12 One source for the improvement in 11 institutions is citizen complaints A bureaucrat trades off the benefit of an extra violation of rules against the cost Expected cost rises as complaints rise, even if responsiveness to complaints is very low Educated people complain more (and more effectively) So, with education, costs of official misconduct rise, and it declines

13 12 A completely decentralized theory consistent with democracy and dictatorship Related to Hirschman and Verba, but do not focus on elections We test the link: education complaints

14 World Justice Project Data 13 Surveys of 1,000 individuals in 65 countries during 2009 and 2011 Representative by gender, education, socio-economic status Only use questions about own or household experience Contains information on income, education, trust Questions on complaints about government and about victimization and reporting of crime

15 Supplementary data for robustness 14 International Crime Victims Survey (ICVS) Crime victimization, reporting, and reasons for reporting and non-reporting in 78 countries 2009 TI Global Corruption Barometer Corruption, its reporting, and reasons for nonreporting in 69 countries

16 Institutional quality and education 15 (WJP data) NOR NZL EST HKG GBR ARE CHL USA CZE BEL ITA BRA ROU SEN VNM GTM CHN MYS IRN JAM LBN RUS KAZ BGD ETH UGA CMR KGZ UKR VEN KHM Education N = 32; coef = 0.036, (robust) se = 0.005; P> t = 0.000; Adj. R2 = Education is measured as school life expectancy (years) from primary to tertiary (2009) Source: WJP and UNESCO

17 Complaints and education Complained about government services Police abuse Report police abuse College 0.045*** *** [0.013] [0.004] [0.032] High/Middle school * [0.013] [0.004] [0.026] Observations 29,820 59,984 3,614 R-squared Mean Dep. Var Number of countries Fixed effects YES YES YES Standard errors clustered by country in parentheses. Significance levels: *** p<0.01, ** p<0.05, * p<0.1

18 Complaints and education (Autocracies and democracies) Complained about government services Police abuse Report police abuse Panel A: Autocracies College 0.080** ** [0.026] [0.009] [0.062] High/Middle school [0.032] [0.008] [0.065] Panel B: Democracies College 0.031** *** [0.012] [0.005] [0.036] High/Middle school [0.012] [0.004] [0.028] Standard errors clustered by country in parentheses. Significance levels: *** p<0.01, ** p<0.05, * p<0.1

19 Robustness: Crime reporting and education (ICVS) Burglary (ICVS) Report burglary (ICVS) Attempt Report Attempt College 0.021*** 0.105*** 0.034*** 0.044*** [0.003] [0.011] [0.003] [0.012] High/Middle school 0.011*** 0.056*** 0.028*** 0.024** [0.002] [0.010] [0.002] [0.010] Observations 126,318 15, ,596 13,382 R-squared Mean Dep. Var Num. of countries Fixed effects YES YES YES YES Standard errors clustered by country in parentheses. Significance levels: *** p<0.01, ** p<0.05, * p<0.1

20 Robustness: Crime reporting and education (ICVS) Robbery Report Robbery Fraud Report Fraud Theft Report Theft College High/Middle school 0.023*** 0.091*** 0.104*** 0.012** * 0.084** * 0.036** * [0.002] [0.016] [0.003] [0.005] [0.003] [0.009] 0.019*** 0.029** 0.052*** 0.014** * 0.044** * 0.014* [0.002] [0.013] [0.003] [0.004] [0.003] [0.007] Observations 126,367 8, ,860 24, ,162 24,475 R-squared Mean Dep. Var Num. of countries Fixed effects YES YES YES YES YES YES Standard errors clustered by country in parentheses. Significance levels: *** p<0.01, ** p<0.05, * p<0.1

21 Corruption reporting and education (ICVS) Report Report Corruption corruption corruption (ICVS) other Police (ICVS) (ICVS) College 0.096*** ** [0.005] [0.007] [0.005] High/Middle school 0.058*** [0.004] [0.006] [0.005] Observations 46,022 5,324 4,432 R-squared Mean Dep. Var Num. of countries Fixed effects YES YES YES Standard errors clustered by country in parentheses. Significance levels: *** p<0.01, ** p<0.05, * p<0.1

22 Corruption reporting and education (TI Barometer) Paid a bribe in the last 12 months Report Corruption College 0.043*** 0.024** [0.004] [0.011] High/Middle school 0.022*** [0.004] [0.010] Observations 60,184 10,179 R-squared Mean Dep. Var Num. of countries Fixed effects YES YES Standard errors clustered by country in parentheses. Significance levels: *** p<0.01, ** p<0.05, * p<0.1

23 Conclusion 22 Educated people complain more Seems to be the effect of education, not just income or trust Probably know rules better, and fear less Might explain institutional improvement

24 23 Another view: government is just like a business Businesses are unproductive in poor countries, perhaps because of bad management, and so are governments How can we test?

25 24 We propose an objective indicator of government efficiency: Performance of the mail system returning an incorrectly addressed international letter. Measure the share of letters we got back, and how long it took to get them back, in each of 159 countries, and analyze correlates of these measures of postal efficiency. Our approach to measuring government efficiency has two key advantages: Simple and universal government service Free from political economy influences, corruption plays no role

26 The Experiment 25 Between December 2010 and February 2011 we sent 10 letters to non-existent business addresses in 159 countries: 2 letters in each country s largest 5 cities. The addresses included an existent city and zip code (where available), but a nonexistent business name and street address. Each envelope Had a typed up address using the Latin alphabet (as required by international postal conventions) and Included a return address and a clear request to please return to sender if undeliverable. All countries subscribe to an international postal convention requiring them to return the letters posted to an incorrect address. The letter was a one page business letter in English requesting a response from the recipient. Nothing else in to avoid the temptation to open and steal (see Castillo et al. 2011). Stopped keeping track of returns a year after the final postings from Cambridge MA (i.e, Feb 4, 2012).

27 The Letters 26

28 The Letters 27

29 The Letters 28

30 29 The Letters

31 Letters Data for Two Countries 30

32 Mail Efficiency (Table 1) 31

33 32 Table 3: Postal Office Characteristics and Alphabet as Determinants of Mail Efficiency

34 33 Table 5: Public Sector Management Quality and Mail Efficiency

35 34 Table 6 : Public Sector Wages and Mail Efficiency

36 35 Table 7 : Attitudes and Decision Making by Public Officials and Mail Efficiency

37 36 Table 9 : Private Sector Management Quality and Mail Efficiency

38 37 Mail Efficiency and Management Quality (Fig.3)

39 38 Mail Efficiency and Management Quality (Fig.3)

40 39 Mail Efficiency and Management Practices (Fig.4)

41 40 Mail Efficiency and Management Practices (Fig.4)

42 Conclusion 41 New objective measures for the quality of government in 159 countries, those based on return of incorrectly addressed international mail. Measures correlate with other indicators of the quality of government, yet have the advantage that we know more precisely what goes into them. An important reason for poor government in developing countries is not corruption or patronage, but rather the same basic low productivity that plagues the private sector. Such low productivity is related to inputs and technology, but also to management. Not all bad government is caused by politics!

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