Unpacking democracy and governance: Conceptualizing governance infrastructure

Abstract

French

This article argues that it is necessary to unpack and appropriately separate the concepts of democracy and governance. The impetus for this research comes from the ongoing and expanding convolution of the concepts of democracy and governance by academics, international institutions and policymakers. One of the more important areas of research that is affected by this convolution argues that democracies guarantee the rule of law and provide superior institutions which considerably influence not only developing states’ overall development trajectories, but also multinational firms’ decisions on where to do business. I argue that these superior institutions, such as the rule of law and quality bureaucracy, are separate from the institutions of democracy and constitute the concept of governance infrastructure. Moreover, it is the institutions that comprise governance infrastructure and not the institutions of democracy that are key institutional determinants of developing states’ economic outcomes. Therefore, only by appropriately conceptualizing governance infrastructure, as is done in this article, and separating it theoretically and empirically from democracy will scholars and policymakers move forward in understanding the determinants of economic development.

Keywords

democracy democratic institutions domestic institutions economic development governance governance infrastructure political stability rule of law

Many scholars believe that democracies guarantee the rule of law and provide superior institutions that considerably influence not only developing states’ overall development trajectories but also multinational firms’ decisions on where to do business (Jensen, 2006). I argue that these superior institutions, such as the rule of law and quality bureaucracy, are separate from the institutions of democracy and constitute the concept of governance infrastructure (GI). Therefore, it is the institutions that comprise governance infrastructure and not the institutions of democracy that are key institutional determinants of developing states’ economic outcomes. The confusion arises from the confounding of the concepts of governance and democracy. Unpacking these concepts, both theoretically and empirically, is a necessary and long overdue endeavor if academics and policymakers are to understand truly the determinants of economic development, evaluate all competing theories concerning the effects of governance and democracy, and eventually make helpful policy recommendations to the countries that need them the most.

The impetus for this research comes from the ongoing and expanding convolution of the concepts of democracy and governance (Bogaards, 2009). In unpacking and separating the concepts of governance and democracy, I argue for the necessity to increase the intension of both in order to evaluate competing theoretical claims about their effects. Therefore, in the present article I increase the intension and concept-measure consistency of governance by creating a minimalist concept of governance, which I call governance infrastructure,¹ and which I define as the core domestic institutions that facilitate government competency and economic efficiency.

It has been repeatedly demonstrated that states offering economic actors guarantees, in terms of abiding by the rule of law, controlling corruption and providing efficient bureaucracies, have greatly improved economic outcomes, whether it be growth, trade or investment (Barro, 1991; Kaufmann, Kray & Zoido-Lobaton, 1999b; Knack & Keefer, 1995; Li & Filer, 2007; Wei, 2000). Moreover, many authors have argued that democratic states provide these guarantees and quality domestic institutions (Bogaards, 2009; Bunce, 2000; Feng, 2001, 2003; Jensen, 2003, 2006). However, I posit that these institutions exist to varying quality, regardless of regime type, and are part of the separate concept of governance infrastructure.

Interestingly, adding to the conceptual confusion is the fact that political scientists tend to combine the institutions and effects of the concept of governance infrastructure into the concept of and effects due to democracy, while economists tend to combine the institutions and effects of democracy into governance. Therefore, it is unsurprising that international institutions such as the World Bank (Kaufman, Kray & Mastruzzi, 2006) and scholars (Bogaards, 2009; Bunce, 2000; Diamond & Morlino, 2005; Merkel, 2004) continue to include elements of democracy among measures of governance and elements of governance among measures of democracy, respectively. All of which makes it increasingly difficult – if not well nigh impossible – to sort out which institutions matter, when they matter, or if they matter at all. This is especially true when attempting to determine which, if any, domestic institutions truly affect the economic outcomes of developing states, knowledge crucial to policymakers who hope to influence their states along a positive development trajectory. As the social world in which we operate is incredibly complex, it is necessary to focus on the minimalist interpretations of democracy and governance, allowing academics and policymakers to begin to sort out the myriad causal relationships in which these two concepts are obviously integral.

I begin by reviewing existing theories of governance and the institutions of which it is comprised. This survey is followed by a brief discussion of several prominent definitions of democracy and a discussion of the definitional and theoretical differences between governance and democracy, which lead me to the conclusion that the conceptualization and construction of governance are woefully divergent from the proposed theoretical structure. Since, up to this point, governance is a somewhat nebulous and very extensive concept, with no agreed-upon definition, while also being conceptualized in a mainly ad-hoc manner, I create a new, more intensive concept, which I call governance infrastructure. This conceptualization seeks to increase the concept-measure consistency of existing concepts of governance, thereby eliminating the overlap of previous iterations with other concepts, specifically democracy. The article concludes with a brief discussion of potential avenues of future work utilizing governance infrastructure.

The institutions of governance infrastructure and democracy

Domestic institutions have repeatedly been shown to be integral to determining states’ economic outcomes, whether they be growth, trade or investment (Barro, 1991; Kaufmann, Kray & Zoido-Lobaton, 1999b; Knack & Keefer, 1995; Li & Filer, 2007; Souva, Smith & Rowan, 2008; Wei, 2000). The institutions in question, to varying degrees, control corruption; ensure rule of law, regulatory quality, bureaucratic quality; and provide political stability. The extant research demonstrates that, all other things being equal, the better quality domestic institutions a state possesses then the better economic outcome a state should expect. In the late 1990s, these institutions were collected under the heading of governance (Kaufman, Kray & Zoido-Lobaton, 1999b).

Examining the literature, it seems clear that the institutions collected under the rubric of governance are important determinants of states’ economic outcomes.² Therefore, it is necessarily important that we understand exactly what the concept of governance is, how it has been used and the domestic institutions of which it is comprised. Following this is a brief and limited review of prominent democratic theory literature, after which I make an argument that in no way is rule of law or any other institution that comprises governance infrastructure conceptually a part of democracy or regime type.³

Conceptualizing governance and its indicators

Very broadly, governance can be thought of as ‘the means by which to infuse order, thereby to mitigate conflict and realize mutual gain’ (Williamson, 2008: 43). Given this understanding of the domestic institutions that comprise governance, it is no wonder that better-quality governance institutions are argued for and have been shown to lead to better economic outcomes. While there is no primary definition of governance in terms of the domestic institutions that affect states’ economic outcomes, two definitions are more prominent. The non-profit organization the Institute on Governance (IoG; founded in 1990) defines governance as: ‘the process whereby societies or organizations make important decisions, determine whom they involve and how they render account’ (Plumptre, 2008). Slightly better known is the World Bank’s (WB) definition, which was developed from previous definitions by the International Monetary Fund and IoG. Governance is presented by Kaufmann, Kraay & Zoido-Lobaton as:

… the traditions and institutions by which authority in a government is exercised. This includes (1) the process by which governments are selected monitored and replaced, (2) the capacity of the government to effectively formulate and implement sound policies, and (3) the respect of the citizens and the state for the institutions that govern economic and social interactions among them. (Kaufmann, Kray & Zoido-Lobaton, 1999b: 1–2)

Arguably, the World Bank’s definition encompasses and refines the definition given by the Institute on Governance; therefore, it is this definition that I will continue to refine. The WB further elaborates its theory of governance as follows:

We summarize two key aspects of the process by which those in authority are selected and replaced with clusters labeled ‘Voice and Accountability’, and ‘Political Instability and Violence’. We capture the capacity of the state to implement sound policies with two clusters we refer to as ‘Government Effectiveness’ and ‘Regulatory Burden’. Finally, two clusters labeled ‘Rule of Law’ and ‘Graft’ capture the respect of the citizens and the state for the rules which govern their interactions. (Kaufmann, Kray & Zoido-Lobaton, 1999b: 2)

In examining the WB’s first and broadest definition of governance, it is clear that for them, the governance of a country is represented by three latent variables. The first latent variable captures the processes by which authority is selected and replaced. The second captures how well a state implements good policy. While the third captures the degree to which citizens respect the rules that govern them. The second part of their definition makes it clear that each latent variable has two indicators that help capture it. The first latent variable is measured by the indicators ‘voice and accountability’ (VA) and ‘political stability’ (PS). The second is measured by the indicators ‘regulatory burden’ and ‘government effectiveness’. While the third is measured by the indicators ‘rule of law’ and ‘graft’.⁴ Overall, they develop six separate indicators of the quality of states’ governance.

After reviewing the WB’s six indicators, the first question that arises is: Does each indicator truly belong to the concept of governance? This question is important because the description of the ‘voice and accountability’ indicator sounds suspiciously close to a measure of regime type. VA is intended to capture the extent to which citizens participate in the selection of their governments (Kaufmann, Kray & Zoido-Lobaton, 1999b). As defined by the WB, voice and accountability could easily be construed as a measure of democracy. Arguably, this is a theoretically untenable position unless the concepts of governance and democracy are the same thing. While both of these concepts are composed of domestic institutions, they are different theoretically and conceptually; however, it is clear that VA most clearly measures aspects of regime type and should not be included in a concept of governance. Reinforcing this point is the fact that one of the indicators used by the WB from which to derive their VA measure is the Freedom in the World Index, published by the non-profit organization Freedom House, a well-respected measure of regime type within the academic and policy worlds (Freedom House, 2009). Moreover, looking at Table 1, we see that the correlations between the WB’s VA measure and the two main measures of regime type used in the political science literature, the Freedom House measure and PolityIV, are quite high. All of which lends further support to my argument that VA is indeed a measure of the latent variable democracy and not of governance.

Table 1.

Correlation matrix for measures of regime type (years 1996, 1998, 2000, 2002–2007), where all three measures overlap

	Voice and accountability	Freedom House	PolityIV
Voice and accountability	1.00	–	–
Freedom House	0.96	1.00	–
PolityIV	0.84	0.90	1.00

Interestingly, the other indicator that falls under the latent measure governance intended to capture, ‘the process by which those in authority are selected and replaced’ – political stability – also appears to not truly belong within a conceptualization of governance. Bollen & Jackman (1989) and Haggard, MacIntyre & Tiede (2008) argue that political stability is a separate concept unto itself and should be treated as such. Moreover, Haggard, MacIntyre & Tiede (2008) argue that it makes little sense to talk about the other institutions of governance if the agents that maintain or use these institutions are not secure. This argument clearly separates PS from the institutions of governance. Political stability is a political-science concept in its own right. Therefore, it seems quite reasonable to posit that PS is not a part of governance and is an independent concept.

Now that it has been determined that VA and PS are not theoretically or empirically part of the concept of governance, that leaves the following indicators of governance: regulatory quality (RQ), government effectiveness (GE), rule of law (RoL) and control of corruption (CC). As these indicators fit my earlier proposed definition, ‘the core domestic institutions that facilitate government competency and economic efficiency’, and are not part of existing concepts, it is these indicators that will be used to create the new concept of governance infrastructure.

Briefly conceptualizing democracy and its indicators

Many of the most prominent political and social science scholars throughout history have pondered what exactly makes a democracy a democracy.⁵ If one were to deem democracy the best form of government known to humanity, then one would most likely want to know exactly what constitutes this ‘extraordinary’ form of government. One of the best-known early pieces of literature concerning democracy was written by Jean-Jacques Rousseau in 1763 (Rousseau, 2003[1968]). In his treatise, The Social Contract, he argues that the general will of the people will always be good: ‘from the deliberations of a people properly informed, and provided its members do not have any communication among themselves, the great number of small differences will always produce a general will and the decision will always be good’ (Rousseau, 2003[1968]: 2). Based upon this, it would follow that for something to be a democracy, the will of the people must be heard, which can be summarized as follows: the civil rights of the people are integral, and if they are protected, the people will do what is good for society. At its most basic formulation, one could argue that democracy is simply the will of the people, and that the general will of the people is good for society; therefore, democracy is good for society. Nowhere within Rousseau’s argument is there a discussion of the previously outlined indicators of governance infrastructure.

Moreover, if one examines some of the most prominent theoretical conceptualizations of democracy, there is no discussion of the indicators that I have outlined as the components of governance infrastructure. This is demonstrated below by a brief review of three prominent conceptualizations of democracy: minimalist, deliberative and polyarchy.

Minimalist democracy

Schumpeter (2003[1976]) refutes Rousseau by claiming that first, there is no common good that can uniquely be determined or agreed upon by mere rationality; and second, that if there were such a thing as a common good, this would not mean that everyone would have the exact same answers or preferences on individual issues. He posits that, because of these two propositions, the concept of the will of the people does not truly exist. He continues this point by arguing that ‘the democratic method is that institutional arrangement for arriving at political decisions in which individuals acquire power to decide by means of competitive struggle for the people’s vote’ (Schumpeter, 2003[1976]: 269). Schumpeter is arguing for a minimalist conceptualization of democracy and that civil rights or ‘abiding by the will of the people directly’ is not necessary for a government to be a democracy and function accordingly. Democracy is merely a method of, and the institutions used in, choosing a government through competitive elections. Through these elections, representatives are chosen, and the common good is derived from the tally of votes. It is the competition for representation that drives democracy, and through this competition that the benefits that citizens acquire from democracy over other forms of government manifest themselves.

Przeworski (2003[1999]) posits that ‘voting constitutes “flexing muscles”: a reading of chances in eventual war. If all men are equally strong (or armed) then the distribution of the vote is a proxy for the outcome of war’ (Dahl, Shapiro & Cheibub, 2003: 15). In addressing the changing value of a vote, he argues that, while technology has changed and one vote does no longer equal the force one person may possess, voting ‘does indicate limits to rule’ (Dahl, Shapiro & Cheibub, 2003: 13). Based upon minimalist conceptualizations, democracy is exemplified in the institutions that enable competitive elections, with the miracle of democracy being that political and potentially violent conflicts are contained through voting and that people obey the vote. In looking at Przeworski’s definition, we see how it is an extension of Schumpeter’s.

Thus ‘democracy’ for us, is a regime in which those who govern are selected through some contested elections. This definition has two parts: ‘government’ and ‘contestation’ … What is essential in order to consider a regime as democratic is that two kinds of offices be filled, directly or indirectly, by elections: the chief executive office and the seats in the effective legislative body … Contestation occurs when there exists an opposition that has some chance of winning office as a consequence of elections. (Przeworski et al. 2000: 16–17)

Clearly, no indicators of governance infrastructure are a part of the minimalist conceptualization of democracy.

Deliberative democracy

At its most basic conceptualization, this definition of democracy requires a country to have democratic institutions that demand a high level of sophisticated and disinterested discourse from the polis. Through this discourse, conflicting policy preferences are resolved in the most democratic manner possible, which means that everyone gets to express their points of view and policy preferences, with the most reasoned argument winning the day through the persuasion of opponents as to what the best course of action is.

Gutmann & Thompson argue that deliberative democracy involves reasoning about politics and define this as ‘when citizens or their representatives disagree morally, they should continue to reason together to reach mutually acceptable decisions’ (Gutmann & Thompson, 1996: 2). The benefits of this are obvious to proponents of deliberative democracy. If the polis or their representatives are required to reason until a mutually acceptable policy decision is derived, then everyone gets a say in policy, meaning that no-one is discriminated against. Additionally, inherent in Gutmann & Thompson’s definition is the need for universal suffrage and the provision of civil liberties. The entire polis needs to be able to participate in the discussion, and everyone needs to be able to assemble and have the freedoms to express their preferences. Like Rousseau’s definition of democracy, a deliberative conceptualization of democracy requires civil liberties – but not indicators of governance infrastructure. This further supports the argument that VA is not a measure of governance but a measure of regime type.

Polyarchy

A main critique of minimalist definitions of democracy is that they are only ‘procedurally democratic’, and countries that meet only these requirements are not fully democratic (see Dahl 1956, 1971, 1989, for more elaborate discussions). Moving beyond ‘procedurally democratic’, Dahl defines democracy as follows:

I should like to reserve the term ‘democracy’ for a political system one of the characteristics of which is the quality of being completely or almost completely responsive to all its citizens … to be responsive … all full citizens must have unimpaired opportunities: (1) to formulate their preferences, (2) to signify their preferences … by individual and collective action, (3) to have their preferences weighed equally in the conduct of government … These, then, appear to me to be three necessary conditions for democracy, though they are probably not sufficient … Some requirements for a democracy among a large number of people: (1) Freedom to form and join organizations, (2) freedom of expression, (3) right to vote, (4) eligibility for public office, (5) right of political leaders to compete for support and votes …, (6) alternative sources of information, (7) free and fair elections, (8) institutions for making government depend on votes … (Dahl, 1971: 2–7)

Dahl (1989) argues that no state can ever reach full democracy or the true democratic ideal, and that is why he coins the term ‘polyarchy’ – a government of the people that is mostly democratic. Dahl has five criteria that a state must fulfill in order to be considered a polyarchy. The first of these is equal opportunity for the polis, meaning that each member has the right to voice their opinions and express their policy preferences. The next criterion is agenda-setting opportunity; this allows each member of the polis to have adequate and equal opportunities at placing policies on the agenda. This is followed by enlightened understanding, in that each voting member should have an adequate understanding of the issues and ‘equal opportunities for discovering and validating (within the time permitted by the need for a decision) the choice on the matter to be decided that would best serve the citizens’ interests’ (Dahl, 1989: 112). Dahl then outlines the need for voting equality at the decisive stage, meaning that each citizen must have equal opportunity to express his or her choice and each choice will be counted with an equal weight. The final condition a state must possess in order to be considered a polyarchy is one of inclusion. Inclusion means that all people within a state have the opportunity to vote, as long as they are adults and are not transients or mentally incapable.

Once again, the components of governance infrastructure are not part of this conceptualization of democracy. In fact, when looking at a survey of democratic conceptualizations and measures by Munck & Verkuilen (2002), not one of the quantitative indexes created by various authors uses an indicator of governance infrastructure as a part of democracy.⁶ Only a more recent conceptualization of democracy has begun to use an indicator of governance infrastructure – the rule of law as part of their conceptualization of democracy – which without the rule of law is referred to as ‘defective democracy’ (Bogaards, 2009; Merkel, 1999, 2004). However, as many other authors have pointed out, rule of law should not be considered a constituent part of democracy but at best a pre-condition for a high-quality democracy (Bunce, 2000). Bunce argues that ‘the culture and practice of rule of law’ is a guarantor of transitioning to democracy and capitalism, or improved development (Bunce, 2000: 714). This clearly implies that, while the rule of law may be necessary for a transitioning democracy to be successful in its transition, it is not an actual part of democracy; it is separate. It is separate because it is part of the concept of governance infrastructure.

By briefly reviewing the prominent literature on the conceptualization and quantitative measurement of democracy, it is clear that the prominent democratic scholars do not believe that the indicators I have outlined as part of governance infrastructure are truly part or indicators of democracy. Moreover, confounding the two separate concepts as one makes it nearly impossible to sort out empirical relationships, in which both democracy and governance infrastructure are important factors.

Conceptualizing governance infrastructure

I have clearly established that governance and democracy are different concepts and the institutions represented by voice and accountability are a part of democracy. Additionally, I have demonstrated that the institutions representing political stability are a separate concept in their own right, and the rule of law is comprised within the concept of governance not democracy. As the World Bank’s indicators of governance encompass previously used measures and are perhaps the most widely used indicators of the institutions that comprise governance, I argue that the indicators I have not yet ruled out (government effectiveness, regulatory quality, rule of law and control of corruption) are the proper indicators of a more intensive, minimalist conception of governance, which I call governance infrastructure.⁷ The next step is to determine the best way to aggregate these indicators into a single measure of the quality of states’ governance infrastructure. Since I define governance infrastructure as the core institutions that facilitate government competency and economic efficiency, I posit that the best way to represent the concept of governance infrastructure is as a single latent variable. This assumption is supported by the correlations of the indicators presented in Table 2 since the lowest correlation between indicators is 0.85, and a good latent variable requires high correlations (Bollen & Lennox, 1991; Goertz, 2005).

Table 2.

Correlation matrix of the indicators of governance infrastructure (years 1996, 1998, 2000, 2002–2007), where all four measures overlap

	Government effectiveness	Regulatory quality	Rule of law	Control of corruption
Government effectiveness	1.00	–	–	–
Regulatory quality	0.91	1.00	–	–
Rule of law	0.95	0.89	1.00	–
Control of corruption	0.94	0.85	0.95	1.00

Given that governance infrastructure is the latent variable and has four indicators, the overall concept of governance infrastructure is a two-level concept and is represented in Figure 1. The institutional data indicators on the right side of the figure are taken from the Worldwide Governance Indicators (WGI) dataset developed by Kaufmann, Kraay & Zoido-Lobaton (1999b) under the auspices of the World Bank (Kaufmann, Kraay & Mastruzzi, 2008).

Figure 1.

Two-level concept construction of governance infrastructure.

The World Bank’s initial range for each indicator is a normal distribution ranging from a possible -2.5 to +2.5 with a mean of 0. The original data sources consist of surveys of firms and individuals, as well as the assessments of commercial risk-rating agencies, non-governmental organizations and multilateral aid agencies. The sources are then aggregated into the individual indicators by using an unobserved-components model. It is the unobserved-components model which assumes the output is normally distributed (Kaufmann, Kraay & Mastruzzi, 2006; see Kaufmann, Kraay & Zoido-Lobaton, 1999a, for more information on their methodology).

Recently, there has been some debate concerning the trustworthiness of the World Bank’s Worldwide Governance Indicators, due to the fact that they are subjective in nature and not de jure (Glaeser et al., 2004; Voigt, 2009). However, components of these aggregated measures have been used repeatedly throughout political-science and economics literature (e.g. Asiedu, 2006; Busse & Hefeker, 2007; Globerman & Shapiro, 2003; Jakobsen & de Soya, 2006; Knack & Keefer, 1995, 1997; Li & Filer, 2007; Li & Resnick, 2003; Souva, Smith & Rowan, 2008). Li & Resnick (2003) also point out that such measures are based upon data from third-party observers and not investors. Moreover, they argue that, based upon North’s (1990) definition of institutions, the quality of institutional features should not be based on written rules ‘but should reflect the enforcement characteristics of rules and norms of behaviors’ (North, 1990: 109). The WGI are representative of these enforcement characteristics and therefore consistent with North’s conceptualization of domestic institutions, making them perfectly reasonable indicators of the proposed latent variable, governance infrastructure (for further discussions see Apaza, 2009; Arndt & Oman, 2006; Kaufmann, Kraay & Mastruzzi, 2007a,b,c; Kurtz & Shrank, 2007a,b).⁸

The next step is to decide the appropriate way to combine the indicators into a single conceptualization of the latent variable, governance infrastructure. Four prominent methods of aggregation are used in the political-science literature: additively; take the minimum; take the arithmetic mean; or take the maximum. Combining the indicators additively or through the maximum is rejected immediately, because this would allow the possibility of the concept of governance infrastructure to be large and positive even if one of the indicators is large and negative.⁹ One could not intuitively believe that a country that has very poor-quality rule of law should have high-quality governance infrastructure if it has high scores on the other three indicators. This leaves the arithmetic mean and minimum as choices for aggregation.¹⁰ There are no theoretical reasons for choosing one over the other as a means to combine the indicators of governance infrastructure, so a reasonable way to determine which is the most appropriate aggregation technique is to examine substantive effect and model fit of differently aggregated measures of governance infrastructure, where we are positive of the appropriate results before the models are run (Goertz, 2005).

In this case, I have chosen a very simple model of economic development with differently aggregated measures of governance infrastructure as the only independent variable in separate and directly comparable models. As discussed earlier in this article, the institutions of governance infrastructure have repeatedly been shown to be significant and positive determinants of economic growth, in line with Shirley’s (2008) recent argument that these institutions are ‘a – if not the – determinant of development’ (Shirley, 2008: 615). A simple cross-sectional/time-series regression model is used, and, following extant literature on economic development, the dependent variable is the natural log of gross domestic product per capita (GDP/PC). The sample is composed of all countries with less than $12,000 GDP/PC – these being identified as developing countries by the World Bank – for the years 1996, 1998, 2000, 2002–2007.¹¹ The measures of governance infrastructure are lagged by one observational period to help deal with causality, and Arellano (1987) standard errors, clustered on country are used. Table 3 presents the two models and, following the literature on domestic institutions and economic development, both measures of governance infrastructure are expected to be large, positive and highly significant determinants of development.

Table 3.

Comparing the relationship between differently aggregated measures of governance infrastructure and economic development in non-rich countries (years 1996, 1998; and 2000, 2002–2007)

	Model 1	Model 2
GI (min)	1.172 ***	–
	(0.120)
GI (mean)	–	1.276 ***
		(0.115)
Constant	7.810 ***	7.576 ***
	(0.0895)	(0.0759)
N	607	607
R²	0.386	0.426
BIC (Schwarz Criterion)	1687.689	1642.672

Note: OLS estimates with Arellano (1987) clustered standard errors in parentheses.

***

p<0.001, ** p<0.01, * p<0.05. Data range is 1996, 1998, 2000, 2002–2007, and subject to availability. All parameters were lagged by one observational period to help account for causality.

First, it is important for the validity of this exercise that the coefficients of both measures of GI are large, positive and highly significant determinants of development. Second, it is clear that one of the aggregations outperforms the other in terms of substantive impact, explanatory power and model fit. The governance infrastructure measure created using the mean aggregation technique not only has a larger coefficient and smaller standard error, but it also explains significantly more of the variance in the economic development of non-rich countries over the period examined, while also having a smaller BIC (Schwarz Criterion), indicating a much better model fit (Beck & Katz, 2001). Given this information, it seems quite clear that the appropriate way to aggregate the proposed concept of governance infrastructure is by using mean aggregation, at least when the goal of the research is to assess GI’s effect on states’ economic outcomes.¹²

Conclusion

The goal of this article has been to unpack the concepts of governance and democracy and in doing so to create and advocate a minimalist conceptualization of governance. This more intensive, concept-measure consistent, minimalist concept is called ‘governance infrastructure’, and it represents the core institutions in a state that facilitate government competency and economic efficiency. By using the World Bank’s governance definitions and indicators as a jumping-off point, I argued that only four of their original six indicators actually capture parts of the concept of governance, with the indicator ‘voice and accountability’ actually being an indicator of regime type and the indicator ‘political stability’ being a separate concept in its own right.

Moreover, since some scholars have assumed that democracies automatically provide the rule of law, some have even begun to incorporate this in their conceptualizations of democracy. However, it was demonstrated through a brief review of prominent scholars’ conceptualizations of democracy that the rule of law, or any other indicator of governance, is clearly separate from the minimalist concept of democracy.

Finally, I examined various ways in which the indicators of governance infrastructure should be combined to best capture this latent variable. Through the analysis of various GI aggregations (substantive impact, explanatory power and effect on model) fit in a simple model of economic development, I have determined that the arithmetic mean aggregated governance infrastructure is the most appropriate aggregation. By appropriately conceptualizing governance infrastructure and separating it theoretically and empirically from democracy, scholars and policymakers can move forward in understanding the determinants of economic development. Additionally, if we accept governance infrastructure as conceptualized here, then we can begin to move forward with evaluating what are the concepts and theories that really matter in affecting developing states’ economic outcomes in a positive manner. In fact, given this aforementioned conceptualization, most of the positive effects on economic outcomes attributed to democratic institutions would actually be due to governance infrastructure, and if improving states’ democratic institutions does have a positive effect on economic outcomes, it would most likely be due to civil liberties or domestic audience costs (Baird, 2010). Perhaps the most important future work concerning the understanding of how governance infrastructure and democracy interact with one another, while jointly affecting states, has to do with the possibility that governance infrastructure is a pre-condition for a consolidated democracy, as Bunce (2000) implies.

Footnotes

Appendix

Table A1.

Summary statistics of differently aggregated measures of governance infrastructure

	Number of observations	Mean	Standard deviation	Min	Max
GI (max)	607	−0.183	0.644	−1.430	1.520
GI (min)	607	−0.671	0.648	−2.380	1.230
GI (mean)	607	−0.432	0.626	−1.663	1.350

Acknowledgements

Any opinions contained in this article are solely those of the author and do not necessarily shape or reflect those of the US Department of Defense. All errors are also solely the author’s. A much earlier version of this paper was presented at the 2009 Annual Meeting of the American Political Science Association, 3–6 September in Toronto, CA. I would like to thank Gary Goertz, Tom Volgy, Bill Dixon and Lane Kenworthy for their comments on this paper. I would also like to thank Pierre-Marc Daigneault for organizing this symposium and allowing me to be a part of it. Finally, I wish to thank Ashley Motia for her helpful revisions.

This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.

Notes

Author biography

Ryan G Baird received his PhD in 2010 from the School of Government and Public Policy at the University of Arizona, and now works for the Department of Defense. He has written extensively on the primacy of states’ governance infrastructure, and its relationship with regime type and economic outcomes. Other research interests include the relationships between economic interdependence and conflict, as well as the study of regional and major powers. His latest (co-edited) book is entitled Major Powers and the Quest for International Status in International Politics: Global and regional perspectives (Palgrave Macmillan, 2011).

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