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Determinants of Government Effectiveness

Article in International Journal of Public Administration · July 2013

DOI: 10.1080/01900692.2013.772630

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International Journal of Public Administration, 36: 567–577, 2013
Copyright © Taylor & Francis Group, LLC
ISSN: 0190-0692 print / 1532-4265 online
DOI: 10.1080/01900692.2013.772630

Determinants of Government Effectiveness

Isabel Maria Garcia-Sanchez and Beatriz Cuadrado-Ballesteros
Administration and Business, University of Salamanca, Salamanca, Spain

Jose Frias-Aceituno
Financial Economics and Accounting, University of Granada, Granada, Spain

The direct relationship between government effectiveness and the population’s well-being has
generated a growing interest about the explanatory factors of governance quality. Thus, the aim
of this study is to determine the determinants of government effectiveness, in relation to the
organizational environment and political and internal characteristics of public administrations.
For this, we used a sample composed by 202 countries observed between 2002 and 2008.
A World Bank governance indicator represents the government effectiveness. We estimated
a panel data dependence model by the Generalized Method of Moments estimator to avoid
heterogeneity and endogeneity problems. Furthermore, a CHAID algorithm provides a classi-
fication of governance quality according to the predicted determinants.
The results show that government effectiveness is initially explained by the organizational
environment, related to economic development and educational status. Later, and according
to countries’ income distribution, political constrains and some organizational characteristics,
such as gender diversity and government size, may improve governance quality.

Keywords: government effectiveness, political factors, gender diversity

INTRODUCTION
Governance is a multi-faceted concept encompassing all
aspects of the exercise of authority through formal and
informal institutions in the management of the resource
endowment of a state (Huther & Shah, 1998). Its effective-
ness refers to whether the public administration does well
what it is supposed to do, whether people in these entities
work hard and well, whether the actions and procedures of
the public organizations and its members help achieve the
objectives, and in the end, whether it actually achieves its
mission (Rainey & Steinbauer, 1999).
More concretely, government effectiveness is oriented to
more closely matching services with citizen preferences,
and moving governments closer to the people they are
intended to serve, thus ensuring greater accountability of the
Correspondence should be addressed to Isabel Maria Garcia-Sanchez,
Administration and Business, University of Salamanca, Campus Miguel de
Unamuno, Edificio FES, Salamanca, 37007, Spain. E-mail: lajefa@usal.es
public sector (Huther & Shah, 1998). Several studies show
that improved governance leads to better development out-
comes such as, among other variables, economic growth,
public investment, foreign direct investment, and social
infrastructure (Gupta et al., 1998; Mauro, 1998; Boswell &
Richardson, 2003; McKinney & Moore, 2008), as well as
reducing infant mortality (Gupta et al., 1999; Kaufmann
et al., 1999, 2004), since countries with high levels of cor-
ruption invest more in housing and physical capital than
in health and education (de la Croix & Delavallade, 2006;
Rajkumar & Swaroop, 2008).
Some authors (e.g., Wolf, 1993, 1997; O’Toole & Meier,
1999, 2003; Rainey & Steinbauer, 1999; Brewer & Selden,
2000; Lynn et al., 2000; Provan & Brinton, 2001; Boyne,
2003; Ingraham et al., 2003; Kim, 2004; Moynihan &
Pandey, 2005) have proposed a variety of effectiveness
models, and at the conceptual level as well (Rothstein &
Teorell, 2008), but the number of studies that predict orga-
nizational effectiveness using sets of independent variables
is smaller (e.g., Campbell, 1977; Adserá et al., 2003;
Bäck & Hademius, 2008; Lee & Whitford, 2009; Charron &
Lapuente 2010).
568 GARCIA-SANCHEZ, CUADRADO-BALLESTEROS, AND FRIAS-ACEITUNO
These previous papers have proposed several possible
explanations for the differences in government effective-
ness across a variety of countries: geographic location, legal
origin, economic development, the constitutional design
(presidential versus parliamentary systems; federalism and
electoral system), and the characteristics of the govern-
ment in power (electoral fraud and military regimes), among
others.
The results obtained in these studies are limited, since in
order to avoid endogeneity problems, some of the authors
used dummy variables to identify different status and sys-
tems, but all of them turned out to be highly correlated
to each other, that is, they tend to represent the countries
themselves. Moreover, they did not use panel data mod-
els that allow us to control for unobservable heterogeneity,
an important problem when the available information com-
prises several yearly measurements of the same countries.
In addition, these papers have not considered that public sec-
tor reform trajectories are broadly determined as well by
the features of the political-administrative regime (Pollitt &
Bouckaert, 2004).
Thus, the objective of this article is to determine the
explanatory factors of government effectiveness in order
to evidence how it is affected by the organizational envi-
ronment, that is, the political and the internal characteris-
tics of public administration. In this sense, Public Choice
theory develops a conceptual framework in which gov-
ernance, in addition to organizational characteristics, is
a balance between collective citizen interests and politi-
cal considerations, since political decisions affect voters
and interest groups in return for, respectively, votes and
resources (i.e., money to finance electoral campaigns), which
increases the probability of politicians’ retaining their posi-
tions (Bavetta & Padovano, 2000, p. 5).
In line with the latest research, we selected the entire gov-
ernment of countries worldwide since previous studies have
generally focused on a specific unit of the administration of
a single country. Moreover, when the sphere is higher, they
only refer to a specific group of countries with similar levels
of economic development.
In particular, our article assesses effectiveness by examin-
ing entire governments and comparing them across countries
using the World Bank dataset of Governance Indicators
for 2002–2008 to assess perceived effectiveness of gov-
ernments across 202 countries. In order to avoid the cited
limitations, the analysis model proposed is estimated using
panel data models, specifically, the Generalized Method of
Moments (GMM) estimator. In addition, we estimated a
CHAID algorithm in order to identify different classifica-
tions of government effectiveness according to its predicted
determinants. The results show that the organizational envi-
ronment and political and organizational characteristics play
an important role in the process of improving government
effectiveness; however, the role of these factors depends on
the countries’ economic development.
The article is organized as follows. Section 2 presents
an approach to the explanatory factors of government effec-
tiveness. Section 3 explains the methodological approach.
Section 4 incorporates the empirical results and their discus-
sion. The final section highlights the main conclusions of the
research.
DETERMINANTS OF GOVERNMENT
EFFECTIVENESS
Previous studies that have sought to identify the explana-
tory factors of government effectiveness show that national
income is its only determinant. However, these papers have
not considered that public sector reform trajectories are
broadly determined as well by the features of the political-
administrative regime (Pollitt & Bouckaert, 2004).
The Public Choice theory proposed by Buchanan (1954)
argues that politicians’ behavior is oriented to satisfy their
own interests and, eventually, to achieving governance qual-
ity and social welfare. Nevertheless, Buchanan recognizes
some limits to this political activity, since the goods and
funds managed are public in nature; consequently, citizens—
as owners of those resources—have legal mechanisms to
monitor politicians’ decisions, such as contrary votes in
future elections. Therefore, politicians will make decisions
based on the exchange relationships among many individu-
als; starting from these relationships, politicians will attempt
to satisfy the different and probably divergent citizens’ pref-
erences with the purpose of obtaining favorable results for
them. On the other hand, political actions are determined
also by organizational characteristics that favor or discourage
certain behaviors or reforms.
Taking into account these arguments, this article presents
an exploratory theoretical framework for possible explana-
tions for the differences in government effectiveness. More
concretely, this framework links organizational environment
and internal and political characteristics. Figure 1 represents
these relationships.
Organizational Environment
The organizational environment comprises the demand
for government effectiveness (Brudney & Selden, 1995;
Moon & Norris, 2005), strongly joined to citizens pressure.
Traditionally, socioeconomic variables are used as surrogates
for these factors, given that a higher economic and educa-
tional status usually leads to greater public sector reforms
(Cheng, 1992, pp. 7–8).
A well-educated and trained population will demand a
higher volume of information from public administrations
(Tolbert et al., 2008). In relation to economic development
and, according to Lee and Whitford (2009), countries with
unstable economies are unable to hire adequate staff and
maintain quality government infrastructures, processes, and

ORGANIZATIONAL
ENVIRONMENT
Demand
• Economic development
• Educational status
ORGANIZATIONAL
CHARACTERISTICS
Size
Diversity
POLITICAL
CHARACTERISTICS
FIGURE 1 Government effectiveness framework.
practices, and therefore these deficiencies become reasons
for evaluators to grade some governments as having lower
effectiveness.
Organization Characteristics
In general, the organizational characteristics are strongly
joined to the complexity of public bodies. However, in line
with the private sector, it is necessary to consider other
relevant and current aspects such as diversity.
Size is considered to be the major variable in the pub-
lic sector reforms literature (Brudney & Selden, 1995).
It is presented as one of many organizational characteris-
tics because country size is related to the magnitude of its
government’s level of resources and public services. Larger
countries have more and better trained staff, a larger budget
and well-established departments (Moon & Norris, 2005).
The positive impact of large size on public sector technical
or managerial innovations has been widely evidenced (e.g.,
Smith & Taebel, 1985; Norris & Moon, 2005).
However, nowadays, there is an important conviction that
diversity in regard to age, gender, and nationality could ben-
efit organizations by providing a greater understanding of
their environmental demands (Carter et al., 2003). Of these,
gender presence is the most important diversity effect since
women introduce their roles as women and mothers into their
profession (Betz et al., 1989), present different ethical frames
and criteria from those habitually used by men in their judg-
ments, and have a positive impact on the work environment
(Harris, 1989).
Gender diversity is a widely discussed topic from a social
perspective, given its advantages and drawbacks and its
influence on the generation of organizational effectiveness
(Rodríguez-Dominguez et al., 2010). Women’s presence
DETERMINANTS OF GOVERNMENT EFFECTIVENESS 569
GOVERNMENT
EFFECTIVENESS
enhances creativity and innovation inside the organization
and will lead to more effective problem-solving, since a more
diverse board, for example, provides a wider variety of per-
spectives and, consequently, a higher number of alternatives
to evaluate (Rose, 2007; Welbourne et al., 2007).
Political Characteristics
Politicians are the main actors in decision-making about the
future evolution of the public administration. They are the
focus of attention because they determine institutional form
and organization, the financing of administrative activity,
the rules governing the employment in administrations, the
incentives, and so on.
Traditionally, their effect could be observed by political
ideology, stability, and competition, but the representative-
ness that these factors have in developed countries and
developing countries is not the same, and therefore they have
had limited success in empirical studies (Alesina et al., 1992;
Barro, 1997).
The use of a political constraint index allows us to directly
measure the feasibility of a change in policy given the struc-
ture of a nation’s political institutions-the number of veto
points-and the preferences of the actors that inhabit them-the
partisan alignment of various veto points and the heterogene-
ity or homogeneity of the preferences within each branch
(Henisz & Zelner, 2010).
METHOD
Population and Sample
In order to achieve our research goals and for the rea-
sons that we have presented in the Introduction section,
570 GARCIA-SANCHEZ, CUADRADO-BALLESTEROS, AND FRIAS-ACEITUNO
we selected most countries worldwide as our target popu-
lation. The sample used refers to the 202 countries selected
by Kaufmann et al. (2008) in order to draw up the World
Bank Governance Indicators. Although in recent years the
countries available have increased to 208, 209, and 212,
we maintain the initial data in order to create a com-
plete panel database. The information needed for the cre-
ation of the proposed variables was obtained from the
World Bank website (http://www.worldbank.org) and from
the POLCON Database (http://www-management.wharton.
upenn.edu/henisz/).
Variables
Dependent Variable
The good governance community has grown in the past
decade, producing many indicators (Andrews, 2010) that
spotlight structural characteristics of governments and asso-
ciated outcomes considered important for development, such
as the World Bank Governance Indicators (WBGI) proposed
by Kaufmann et al. (2004, 2008). These indicators make
the most suitable index to measure government effectiveness
(La Porte, 2005). Among the several WBGI, government
effectiveness indicators (GE) measure perceptions of the
quality of public services, the quality of the civil service and
the degree of its independence from political pressures, the
quality of policy formulation and implementation, and the
credibility of the government’s commitment to such policies.
This index reflects the effectiveness of the entire government
by drawing on data sources that reflect the perceptions of
a very diverse group of respondents through surveys (e.g.,
analysts, firms, agencies with first-hand knowledge of the
FIGURE 2 Yearly Evolution of Government Effectiveness.
governance situation in the country, etc.). The Appendix
shows the concepts measured under GE.
Several authors argue that while this indicator is a very
useful first snapshot of experts’ perceptions of a country’s
quality of governance, users often fail to take into account
their limitations (Arndt, 2008; Andrews, 2010; Pollitt, 2011),
such as
1. lack of transparency,
2. absence of an underlying theory of good governance,
3. hidden bias,
4. lack of comparability over time, and
5. lack of actionability.
However, it is produced by powerful, expertly staffed
organizations that have all been operating for some time.
Moreover, Kauffman et al. (2007) have refuted these criti-
cisms as either conceptually incorrect or empirically unsub-
stantiated.
Figure 2 represents the evolution of the mean of the
government effectiveness indicator for the analyzed period,
2002 to 2008. It can be seen that the values of government
effectiveness are lowest in the first two years, whereas in
2004 this indicator underwent an important increase. Since
2006, the opposite trend can be observed, although the
reduction in government effectiveness is smaller than the
increment identified in the previous years.
Independent variable
In relation to organizational environment, the variables
selected are Gross Domestic Product per capita (GDPpc) to
 DETERMINANTS OF GOVERNMENT EFFECTIVENESS 571

represent economic wealth and Adult Literacy (LITERACY)

to stand for educational status.
Institutional characteristics are represented by DENSITY
and WOMEN. The size of the public body and the overall
level of resources and the professionalization and special-
ization of the civil servants, in general, are measured by
population. However, several studies have observed that the
complexity of public management could be affected by pop-
ulation density since the dispersion hinders the development
of physical services as well as e-government administration.
Gender diversity is measured by the proportion of seats held
by women in national parliaments, expressed in percent-
ages. The measure gender diversity in parliaments is used
instead of women in public services because parliaments
pass diverse laws relating to public management.
With respect to political characteristics, as mentioned
above, we have considered the variable Political Constraint
Index (POLCON) in order to homogenize these factors
worldwide.
Table 1 contains the description and the sources of the
variables proposed for the analysis of the determinants of
government effectiveness.
Analysis Techniques
Dependence model
In order to test the hypotheses proposed, a dependence model
was estimated. The equations used in this research can be
expressed as follows:
GEit = β1 POLCONit + β2 WOMENit + β3 DENSITYit
(1)
+ β4 LITERACYit + β5 GDPpcit + ηi + υit
The equation proposed (1) is estimated using panel data
models, specifically, the Generalized Method of Moments
(GMM) estimator developed by Arellano and Bond (1991).
More concretely, this research technique allows us to control
for unobservable heterogeneity problems, as well as pos-
sible endogeneity between the dependent and independent
variables.
Unobservable heterogeneity problems refer to unobserv-
able differences between the countries that do not vary over
time and directly affect the levels of government effective-
ness of each country. The panel data model offers useful
opportunities for taking these latent characteristics of coun-
tries’ governments into account by modeling it as an indi-
vidual effect, ηi, which is then eliminated by taking first
differences of the variables.
The problem of endogeneity arises when the factors or
independent variables that are supposed to affect a partic-
ular outcome or dependent variable depend themselves on
that outcome. In this sense, Lee and Whitford (2009) have
observed that the economic development of a country has
a positive effect on government effectiveness, and previous
papers have shown that poor governance contributes to lower
economic growth and adverse economic circumstances (e.g.,
Mauro, 1998). To avoid this problem, our model has been
estimated using instruments. To be exact, we have used all

TABLE 1
Variables

Variable Definition

Government This variable encompasses certain issues such as the quality of public service provision, the quality of the bureaucracy, the
Effectiveness competence of civil servants, the independence of the Civil Service from political pressures and the credibility of the
(GE) government’s commitment to policies.
Source: World Bank Governance Indicators (Kaufmann et al., 2008).
POLCON Political constraints, as employed in this paper, estimates the feasibility of policy change using the following methodology.
First, extracting data from political science databases, it identifies the number of independent branches of government
(executive, lower and upper legislative chambers) with veto power over policy change. The preferences of each of these
branches and the status quo policy are then assumed to be independently and identically drawn from a uniform,
unidimensional policy space. This assumption allows for the derivation of a quantitative measure of institutional hazards
using a simple spatial model of political interaction.
This initial measure is then modified to take into account the extent of alignment across branches of government using data
on the party composition of the executive and legislative branches. Such alignment increases the feasibility of policy
change. The measure is then further modified to capture the extent of preference heterogeneity within each legislative
branch which increases (decreases) decision costs of overturning policy for aligned (opposed) executive branches.
The main results of the calculations detailed in Henisz (2002).
Source: POLCON Database
WOMEN Proportion of seats held by women in national parliaments.
Source: World Bank Governance Indicators (Kaufmann et al., 2008).
DENSITY Government size: Population density measured by people per square kilometer.
Source: World Bank Governance Indicators (Kaufmann et al., 2008).
LITERACY Literacy rate of total number of adults.
Source: World Bank Governance Indicators (Kaufmann et al., 2008).
GDPpc Gross Domestic Product per capita adjusted for purchasing power parity (US$).
Source: World Bank Governance Indicators (Kaufmann et al., 2008).
572 GARCIA-SANCHEZ, CUADRADO-BALLESTEROS, AND FRIAS-ACEITUNO

the right-hand-side variables in the models lagged from t-1 to
t-3 as instruments for the equations in differences.
CHAID algorithm
CHAID modeling is an exploratory data analysis method
used to study the relationships between a dependent measure
and a large series of possible predictor variables with which
it may interact. For quantitative variables, the case of this
article, analysis of variance methods are used where inter-
vals are determined optimally for the independent variables
so as to maximize the ability to explain a dependent measure
in terms of variance components.
ANALYSIS RESULTS
differences are the result of Table 3 reflecting the mean of GE
for all of the 202 countries in each year, while Figure 1 first
determines the evolution of each country during the period
2002–2008 and, then, the mean of this evolution.
The correlation between the proposed variables is pre-
sented in Table 4. In this respect, it can be observed that
all the independent variables show a strong positive cor-
relation with government effectiveness. Ordered according
to their Pearson’s correlation coefficients, the most sig-
nificant relations would exist with the variables GDPpc
(0.683), POLCON (0.490), and LITERACY (0.475). As for
the relations between the independent variables, the GDPpc
variable is the one showing the highest correlations with
the rest of the variables, although the coefficients are
not high.

Descriptive Approach Dependence Model

Table 2 provides a synthesis of the descriptive statistics for
each of the variables proposed for the analysis, reflecting the
maximum and minimum values, their mean, and the standard
deviation.
In Table 3, the univariate descriptive statistics related to
the sample mean is identified for each of the time peri-
ods analyzed. The mean of the variable GE show values
very similar between years; however, Figure 2 allows us
to observe significant variances for the same periods. The
Table 5 presents a synthesis of the results of the panel data
model (1), proposed in section 3.3, to find the determinants
of government effectiveness. All of the proposed variables
are relevant from the statistical point of view at different
confidence levels.
In relation to organizational environment, the variables
GDPpc and LITERACY have a positive effect for a con-
fidence level of 90 percent (0.05 < p-value < 0.1) and
99 percent (p-value < 0.01), respectively. Both impacts

TABLE 2
Descriptive Statistics (whole sample)

Minimum Maximum Mean Standard Deviation

GE 0.00 100.00 49.8105 29.15150

GDPpc 80.94293 77880.32418 7531.8509274 11834.34752406
LITERACY 21.82292 99.80000 81.3242785 19.45231101
DENSITY 1.57798 18658.79433 370.2256447 1769.45633972
WOMEN 0.00000 56.30000 14.9926834 9.90028423
POLCON 0.00 0.73 0.2762 0.21314

Note: Dependent variable GE (government effectiveness); Independent variables Organizational envi-

ronment GDPpc (economic development); LITERACY (educational status) Organizational characteristics
DENSITY (government size); WOMEN (gender diversity) Political characteristics POLCON (political con-
straint index).

TABLE 3
Mean Statistic by Year

2002 2003 2004 2005 2006 2007 2008

GE 49.21 49.24 50.09 50.11 50.02 50.02 49.93

POLCON 0.28 0.28 0.27 0.27 0.28 0.29 0.26
WOMEN 12.96331 13.77273 13.98864 15.32000 15.67624 16.14624 16.84153
GDPpc 359.33455 360.71836 365.49599 370.30487 372.49771 378.26635 384.56272
LITERACY 78.37770 58.14118 79.17057 75.36962 80.88475 89.01590 83.84874
DENSITY 6951.69134 7126.76223 7458.37212 7730.54805 8096.60300 8268.64129 7077.25562

Note: Dependent variable GE (government effectiveness); Independent variables Organizational environment GDPpc (economic development);
LITERACY (educational status) Organizational characteristics DENSITY (government size); WOMEN (gender diversity) Political characteristics POLCON
(political constraint index).
 DETERMINANTS OF GOVERNMENT EFFECTIVENESS 573
TABLE 4
with highly concentrated populations in specific areas show
Bivariate Correlations
lower governance quality.
GE POLCON WOMEN GPpc LITERACY DENSITY POLCON, the variable representing political characteris-
tics, has an inverse relationship with the dependent variable
GE
POLCON 0.490∗
for a confidence level of 99 percent. Thus, lower values of
WOMEN 0.328∗ 0.220∗∗ this variable indicate that the executive has total political dis-
GDPpc 0.683∗ 0.289∗∗ 0.336∗ cretion and could change existing policies at any point of
LITERACY 0.475∗ −0.020 0.089 0.405∗ time, while higher values of this factor indicate that a change
DENSITY 0.147 −0.119 0.049 0.205∗∗ 0.069 in existing policies is politically unfeasible.
∗ p-value < 0.01 ∗∗ p-value < 0.05. In order to clearly show the effect of all of the previous
Note: Dependent variable GE (government effectiveness); factors on government effectiveness, a CHAID has been esti-
Independent variables Organizational environment GDPpc (eco- mated. This methodology allows us to obtain a classification
nomic development); LITERACY (educational status) Organizational model of government effectiveness according to the values
characteristics DENSITY (government size); WOMEN (gender diversity)
Political characteristics POLCON (political constraint index).
of the proposed independent variables.

TABLE 5 CHAID Results

GMM Estimations for Government Effectiveness
Figure 3 reflects the effect of the variables proposed on
Coefficient Std. Err. t p-value
government effectiveness according with the results of the
GDPpc 0.003756∗∗∗ 0.0019438 1.93 0.085 CHAID algorithm. Since this algorithm generates segment
LITERACY 0.8237765∗ 0.131283 6.27 0.000 for quantity variables, it permits correction of the high
DENSITY −0.7612781∗ 0.2076942 −3.67 0.005 standard deviation that numerical variables present.
WOMEN 0.1277172∗∗ 0.0575252 2.22 0.054
Economic development is the first determinant of country
POLCON −3.133707∗ 9.510328 −3.30 0.009
z1 78.46(5) groups according to government effectiveness. This variable
m1 −0.63 allows us to observe three clusters:
m2 −0.95
Hansen 6.78(10) 1. countries with a gross domestic product per capita
Notes:
equal to or less than 3806.78517 US$,
1. Heteroscedasticity consistent asymptotic standard error in 2. those with an income level higher than this quantity
parentheses. and under or equal to 25034.92856 US$ and
2. ∗ , ∗∗ and ∗∗∗ indicate significance at the 1 percent, 5 percent and 3. those with an economic level higher than the latter
10 percent level, respectively. amount.
3. z1 is a Wald test of the joint significance of the reported coefficients,
asymptotically distributed as χ 2 under the null of no relationship, degrees
of freedom in parentheses. The level of government effectiveness of the first group
4. mi is a serial correlation test of order i using residuals in first dif- (GDPpc ≤ 3806.78517 US$) has been determined by the
ferences, asymptotically distributed as N(0,1) under the null of no serial political characteristics of the country. In this respect, it is
correlation. possible to observe two groups of countries according to
5. Hansen is a test of the over-identifying restrictions, asymptotically
distributed as χ 2 under the null of no correlation between the instruments
whether the POLCON variable was higher than 0.38 or not.
and the error term, degrees of freedom in parentheses. For the second group (3806.78517 US$ < GDPpc ≤
6. Dependent variable GE (government effectiveness); Independent 25034.92856US$), the size of the government allowed us
variables Organizational environment GDPpc (economic development); to observe three different clusters of governance prac-
LITERACY (educational status). tices: those with a population density equal to or less than
Organizational characteristics DENSITY (government size);
WOMEN (gender diversity) Political characteristics POLCON ( political
59.05719, those with a density higher than this amount and
constraint index). below 141.12983, and those with a density higher than the
latter value. This last group is disaggregated into two other
clusters by LITERACY as a function of whether this variable
indicate that government effectiveness is higher in those is above 49.5213 or not.
countries in which citizens’ demands are quite important. For the last cluster (GDPpc > 25034.92856 US$), gen-
With respect to organizational characteristics, the variable der diversity is the relevant factor in order to improve public
DENSITY has a statistically significant negative impact for sector management. More specifically, the WOMEN variable
a confidence level of 99 percent. In contrast, WOMEN has allows us to define two country groups of government effec-
a direct effect on government effectiveness for a confidence tiveness, those with a diversity higher than 22.79 percent and
level of 95 percent (0.01 < p-value < 0.05). These results those with a diversity below that.
mean that gender diversity plays an important role in the Therefore, jointly, the previous analyses indicate that the
improvement of public sector management, while countries effect of income level is similar to the evidence obtained by
574 GARCIA-SANCHEZ, CUADRADO-BALLESTEROS, AND FRIAS-ACEITUNO

GE
Mean 49.81
St. Dv. 29.15

GDPpc
F = 305.175
(p-value = 0.000)

<3806.78517 (3806.78517 to 25034.92856] >25034.92856

GE mean = 91.328 GE mean = 73.469 GE mean = 33.4442

POLCON DENSITY WOMEN

F = 13.860 F = 30.813 F = 36.143
(p-value = 0.000) (p-value = 0.000) (p-value = 0.000)

<0.38 >0.38 <22.70 >22.70

GE mean =26.2787 GE mean = 46.2353 GE mean = 86.549 GE mean = 96.836

<59.05719 (59.05719 to 141.12983] >141.12983

GE mean = 65.223 GE mean =74.228 GE mean = 53.564

LITERACY
F = 39.018
(p-value = 0.000)

<49.5213 >49.5213
GE mean = 40.168 GE mean = 64.409

FIGURE 3 Determinants of government effectiveness.

Lee and Whitford (2009) in the sense that it is the first deter-
minant of government effectiveness. Following that, and as a
function of income level, the rest of the proposed explanatory
factors play a different role.
Political characteristics form the most important deter-
minant in countries with a lower gross domestic product
per capita. In economies in transition, density is strongly
associated with an unclear effect on the level of effective-
ness, while in those with a higher GDP per capita, citizens’
demands, represented by their educational status, are espe-
cially relevant. For countries with a higher income level,
gender diversity improves governance.
CONCLUSIONS
Government effectiveness is clearly associated with coun-
tries’ economic and social growth, and reflects that public
organizations and their personnel perform the actions and
procedures of their mission well, that is, in accordance with
social well-being.
A limited number of previous studies have sought to
identify the explanatory factors of government effective-
ness, explaining the differences across countries through
geographic location, legal origin, economic development,
and government characteristics. However, they have not
considered several features of the political and adminis-
trative system. Furthermore, these previous studies have
endogeneity and heterogeneity problems, since they did not
use panel data models.
In this sense, this article tries to overcome these lim-
itations, adding new evidence about the determinants of
governance quality. Thus, the main aim of our study is to
determine the explanatory factors of government effective-
ness, specifically, to provide evidence of how it is affected
by the organizational environment and the political and inter-
nal characteristics of public administration. For this, we
have analyzed the effectiveness of the entire governments
of 202 countries for the period 2002–2008. In order to con-
trol for heterogeneity and endogeneity problems, we used
GMM estimator for panel data models. In addition, we
employed a CHAID algorithm in order to provide more con-
crete relationships between government effectiveness and
its determinants. The evidence obtained shows that all of
the proposed factors play a relevant role in the process of
improving governance quality, confirming the validity of the
arguments of Public Choice Theory.
The main determinant of governance is organizational
environment or citizen’s demands, which have a direct rela-
tionship with economic development. Results indicate that
voters direct their votes and resources to the center of power
that best satisfies their preferences, and they therefore influ-
ence the policy implementation decisions of the political
leadership. These actors are expected to be particularly inter-
ested in having their governments increase effectiveness and
politicians try to satisfy these demands in order to obtain
electoral support.

However, the political reforms and actions that improve
governance quality could be favored or discouraged by char-
acteristics of internal organization. In this sense, government
size hinders the implementation of political decisions, while
diversity has the contrary effect. Concretely, gender diversity
may improve the public sector management since women’s
presence enhances creativity and innovation in the decision
making process and they introduce more philanthropic
concerns.
In contrast, in countries with lower voter pressure, gov-
ernment effectiveness is strongly determined by political
characteristics more or less prone to solving problems of
bureaucracy. When the political constraints are low, the exec-
utive can change the policies, when it desires, for improving
the citizens’ satisfaction, allowing them to obtain more
favorable electoral results.
These results provide an international guide for improv-
ing the quality of the governance around the world, taking
into account the organizational environment and internal and
political characteristics of each country. The income level
is the first determinant of government effectiveness. Thus,
in countries with lower economic development, attention to
political constraints is necessary. Meanwhile, in economies
in transition, the educational status is the most impor-
tant determinant in densely populated areas. Finally, gender
diversity may improve the government’s effectiveness in
countries with a high income level.
There are some limitations to this work that could be
overcome in future studies. Firstly, the GE index that we
used has several drawbacks as previously mentioned(e.g.,
lack of transparency, absence of good governance theory,
lack of comparability overtime, etc.). So, new studies could
be focused on the creation of other indexes that overcome
these problems. In addition, they could examine the effects
of government effectiveness on quality of life, transparency,
corruption, and efficiency of public administrations. Finally,
these analyses could be carried out at the local level,
analyzing a locality’s government effectiveness in a specific
country.
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 DETERMINANTS OF GOVERNMENT EFFECTIVENESS 577

APPENDIX

Government effectiveness: Concept measured

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