The use (and abuse) of governance indicators in economics: a review

The relatively recent increase in empirical work on the relationship between governance and economic performance has come about largely as a result of the development of a series of indicators that has allowed this relationship to be quantified. For the researcher, it is important to understand the advantages and disadvantages of these indicators, both to ensure the appropriate indicator is chosen, and to be aware of the limitations each entail. To that end, this paper reviews the common indicators used in empirical analysis, as well as some of the other estimation problems that can arise when using these measures.