possible the criteria in question 16.<sup>13</sup> Again, the IDA dummy is not significant, but the ECA dummy is positive and significant at the .05 level in both regressions. The average ECA country proposed rating (equation 6.7) is about one-fifth of a point higher than predicted. Following the network review process, the magnitude of the bias is reduced slightly, from .192 to .182.<sup>14</sup> The network review has the effect of strengthening (albeit modestly) the relationship between CPIA ratings and comparator indicators. The coefficient on the comparator indicator is slightly greater in the second regression within each pair, for questions 12, 15 and 16. This result is not surprising, as the network reviewers make use of these indicators (as well as other quantitative and qualitative information) in formulating their ratings recommendations.

Table 7 reports regressions similar to those for the even-numbered equations in Table 6, i.e. using the final rather than proposed ratings as dependent variables. They differ however by specifying dummy variables for the other 5 regions, with ECA as the base category. The regional dummy coefficients in this table thus show pair-wise comparisons between ECA and any other single region. Of the 20 regional dummy coefficients in Table 7, 19 are negative (all but the one that is smallest in absolute value), and 8 are statistically significant. Differences with ECA are smaller for SAR than for the other four regions. The largest single coefficient is for the MNA dummy in equation 7.3: ECA ratings on question 15 are more than 1⁄2 point higher than SAR’s, controlling for the EIU comparator indicator and other factors.

The results in Table 6 are reassuring in finding no evidence at all that the CPIA governance ratings incorporate an IDA country bias. These findings do not definitively reject the possibility of an upward bias in the ratings, but any such bias must apply equally to non-IDA countries. An IDA bias does not even show up in the regions’ proposed ratings, suggesting that the regions’ own internal review procedures are successful in deterring or purging any IDA bias in their ratings before they are forwarded to central units for review.

There is evidence, however, of a significant regional bias. Coefficients for the ECA dummy are positive and at least marginally significant in all eight regressions. A comparison of proposed and final ratings indicates that the network review has only a modest impact in curbing this bias. The mean bias over the four questions is slightly more than one-fourth of a point (0.265) in the proposed ratings, and it is reduced only by about 4% (to 0.254) in the final ratings.

If reform progress is spatially correlated and the guidepost indexes reflect lagged information, then a positive and significant regional dummy coefficient in these tests would not necessarily reflect ratings bias. The CPIA ratings might simply reflect more up to date information about progress in one region relative to the other five. However, the network reviews conduct regional comparisons every year similar to those reported in Table 6, and a similar “ECA effect” has been

> 13 The index includes 20 variables from five sources: the World Economic Forum’s (WEF) “Executive Opinion Survey,” the International Country Risk Guide (ICRG), Economist Intelligence Unit (EIU), Freedom House, and Reporters Without Borders.  Data are all from 2012.  The ICRG and EIU ratings are updated monthly, and the others annually.

> 14 Results for questions 12 and 16 in the table are very similar if the 2011 Worldwide Governance Indicators (WGI) “Rule of Law,” “Control of Corruption” and “Voice and Accountability” indexes are substituted for the guidepost indexes.  The WGI indexes include more sources than the guidepost indexes, but are not designed to match the content of the CPIA criteria and contain less up to date information.

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