Towards a Multidimensional Measure of Governance

This paper proposes a new index of governance based on the Alkire-Foster methodology and compares it with the Mo Ibrahim Index of African Governance. The proposed new index improves on existing measures of governance in two ways. First, it is able to incorporate both cardinal and ordinal variables without having to assign cardinal meaning to ordinal variables. The cardinalization of ordinal variables can lead to ambiguous rankings depending on the choice of the cardinal scale. Second, by borrowing the mechanism of cutoffs found in poverty measurement literature, the index can focus attention on nations deprived in terms of governance. The index is computed for the 48 countries of the Mo Ibrahim Foundation’s data. The groups of best-performing and worst-performing nations identified by each of the two methods are largely similar. However, there are some differences among the middle order governance nations. An additional advantage of the proposed methodology is that it involves counting each country’s achievements in the dimensions of governance, which can be presented in a report card of governance.