measuring grand corruption in the political arena or in the tendency of elites to engage in state capture. The presence of corruption is often a manifestation of a lack of respect on the part of both the corrupter (typically a private citizen or firm) and the corrupted (typically a public official) for the rules that govern their interactions. It thus represents a failure of governance according to our definition.

# **Sources of Governance Data**

This section describes the set of governance measures used to construct our six composite governance indicators for 2000-01. We rely on 194 different measures drawn from seventeen different sources of subjective governance data constructed by fifteen different organizations, as listed in table<sup>2.</sup> These sources include international organizations, political and business risk rating agencies, think tanks, and nongovernmental organizations.<sup>2</sup> Four of these sources are included in the 2000-01 index for the first time, and the remaining are updates of sources included in the 1997-98 indicators.<sup>3</sup> In this section, we provide an overview of some of the key features of these sources. A previous paper presents a detailed description of each of the sources.4 We focus on a set of indicators that measures subjective perceptions regarding the quality of governance across countries. We do not attempt to compile or present the wide array of available quantitative and descriptive data on cross-country differences in political and social institutions.<sup>5</sup> While these are certainly important determinants of the cross-country differences in the quality of governance, our focus centers on measuring the reporting of various stakeholders-residents of a country, entrepreneurs, foreign investors, and civil society at large-regarding the quality of governance in a country. This kind of data is inherently subjective, but it is useful for at least two reasons. First, for many issues such as the prevalence of corruption, objective data are almost by definition extremely difficult to 2. For access to the full data set of governance indicators, background papers, and detailed explanations on its sources, visit www.worldbank.org/wbi/governance/govdata2001.htm.

3. Two of the sources we consider updates of existing sources are, in fact, new surveys that include questions similar to those in their previous incarnations. These are the World Bank's World Business Environment Survey, which is a follow-up to the 1997 World Development Report Survey, and the Gallup Millennium Survey, which we treat as a follow-up to the Gallup 50th Anniversary Survey included in our previous paper. Sources also overlap somewhat. A portion of the World Bank's Business and Enterprise Environment Survey (BPS, see www.worldbank.org/wbi/governance/beepsinteractive.htm) was used in the World Business Environment Survey; we refer to the former as a distinct source only when we use questions that appear only in that survey. Also, in 1997 we used data from the Global Competitiveness Survey for Africa as a separate source. In 2000, with the exception of the questions on state capture for transition economies, its questionnaire coincided with that of the World Business Environment Survey, so we include it in the latter source. Finally, one source we used in 1997-98 is no longer published (Central European Economic Review), such that we are unable to update this source.

4. Kaufmann, Kraay, and Zoido-Lobat6n (2002, appendix 1).

5. See for example Beck and others (2001) for a compilation of objective indicators of political systems across countries.

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