people. Countries are ranked into three tiers, beginning in 2001. We use this tier classification as an ingredient for our Rule of Law indicator, which contains a number of other measures of the prevalence of criminal activity. In addition, a few of the data sources that we have used in the past have either been discontinued, or have not been updated and do not appear likely to be updated in the future on a regular basis. These include the Opacity Factor produced by Price-Waterhouse-Coopers, the USAID/Vanderbilt University Democracy Surveys, the Fundar rankings of budget transparency in Latin America, and the African governance indicators produced by the UN Economic Commission for Africa.<sup>3</sup> To improve the comparability of our estimates of governance over time by having a somewhat more balanced set of sources in each period, we have dropped these measures and recalculated our historical estimates based on this slightly smaller set of data sources. Finally, we have made a number of minor revisions and corrections to the past underlying indicators for 1996-2004. Together these revisions in virtually all cases result in only minor changes in our earlier estimates of governance.<sup>4</sup> Our data sources reflect the perceptions of a very diverse group of respondents. Several are surveys of individuals or domestic firms with first-hand knowledge of the governance situation in the country. These include the World Economic Forum’s Global Competitiveness Report, the Institute for Management Development’s World Competitiveness Yearbook, the World Bank’s business environment surveys, and a 3 In the 2004 update of the governance indicators we relied on data from 37 sources produced by 31 organizations. Our number of organizations falls by six of our deletion of four sources, one of which was produced by two organizations (the Latin America surveys produced by USAID and Vanderbilt University), and also because Global Insight which produced the DRI ratings in 2004 has since also acquired World Markets Online, another of our sources. The number of sources falls by six because (i) we have dropped four sources, (ii) we now count three separate Gallup surveys performed in different years as one source, (iii) we no longer separately count the GCS survey of Africa in 1998 as a separate source but merge it with the GCS for all other countries in that year, and (iv) we add one new source as described in the text, for a net change of six. 4 The correlation between our revised and updated estimates is greater than 0.99 for all but four of the series affected by our backward revisions. Our revised data for GE in 1996 is correlated with the old data at 0.98. In 2004 our main revision was to use the final 2004 CPIA scores, which were unavailable at the time of the release of the 2004 indicators. This had a slightly greater effect on our estimates for PV, RQ, and CC, whose correlations with the old indicators range from 0.96 to 0.97. In only one small territory did our revisions result in a change in an estimate of governance that was statistically significant (in the sense of the 90% confidence intervals for the two estimates not overlapping). This is for the small island state of Tuvalu (which has very few sources) for CC in 2004, where our revisions resulted in a significant improvement for that country.

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