Acemoglu, Daron, Simon Johnson, and James A. Robinson Institutions as the Fundamental Cause of Long-Run Growth.

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13 Appendix: Part I: Table 1 xiii

14 xiv

15 Appendix: Part Ib Assessment of QoG Data for E.U. states Complete rankings for each pillar 1.Government Effectiveness 2. Control of Corruption 3. Rule of Law 4. Voice & Accountability 5. QoG Combined Rank 1 DENMARK 1 FINLAND 1 DENMARK 1 SWEDEN 1 DENMARK 2 SWEDEN 2 DENMARK 2 AUSTRIA 2 NETHERLANDS 2 SWEDEN 3 FINLAND 3 SWEDEN 3 SWEDEN 3 LUXEMBOURG 3 FINLAND 4 NETHERLANDS 4 NETHERLANDS 4 FINLAND 4 DENMARK 4 NETHERLANDS 5 AUSTRIA 5 LUXEMBOURG 5 LUXEMBOURG 5 FINLAND 5 AUSTRIA 6 UNITED KINGDOM 6 AUSTRIA 6 NETHERLANDS 6 IRELAND 6 GERMANY 7 GERMANY 7 GERMANY 7 IRELAND 7 BELGIUM 7 UNITED KINGDOM 8 LUXEMBOURG 8 IRELAND 8 GERMANY 8 AUSTRIA 8 IRELAND 9 FRANCE 9 UNITED KINGDOM 9 UNITED KINGDOM 9 GERMANY 9 LUXEMBOURG 10 IRELAND 10 FRANCE 10 MALTA 10 UNITED KINGDOM 10 FRANCE 11 BELGIUM 11 BELGIUM 11 FRANCE 11 FRANCE 11 BELGIUM 12 MALTA 12 SPAIN 12 BELGIUM 12 MALTA 12 MALTA 13 CYPRUS 13 PORTUGAL 13 SPAIN 13 PORTUGAL 13 SPAIN 14 ESTONIA 14 CYPRUS 14 CYPRUS 14 SPAIN 14 PORTUGAL 15 PORTUGAL 15 MALTA 15 PORTUGAL 15 ESTONIA 15 CYPRUS 16 CZECH REPUBLIC 16 SLOVENIA 16 ESTONIA 16 CZECH REPUBLIC 16 ESTONIA 17 SLOVENIA 17 ESTONIA 17 SLOVENIA 17 SLOVENIA 17 SLOVENIA 18 SPAIN 18 HUNGARY 18 CZECH REPUBLIC 18 HUNGARY 18 CZECH REPUBLIC 19 SLOVAKIA 19 SLOVAKIA 19 HUNGARY 19 CYPRUS 19 LITHUANIA 20 HUNGARY 20 POLAND 20 GREECE 20 ITALY 20 HUNGARY 21 LITHUANIA 21 CZECH REPUBLIC 21 LITHUANIA 21 SLOVAKIA 21 SLOVAKIA 22 LATVIA 22 LATVIA 22 LATVIA 22 GREECE 22 GREECE 23 GREECE 23 LITHUANIA 23 POLAND 23 LATVIA 23 LATVIA 24 POLAND 24 ITALY 24 SLOVAKIA 24 POLAND 24 POLAND 25 ITALY 25 GREECE 25 ITALY 25 LITHUANIA 25 ITALY 26 BULGARIA 26 ROMANIA 26 ROMANIA 26 BULGARIA 26 BULGARIA 27 ROMANIA 27 BULGARIA 27 BULGARIA 27 ROMANIA 27 ROMANIA List of Underlying Sources of World Bank Governance Data for E.U. Countries BRI Business Environment Risk Intelligence DRI Global Insight Global Risk Service EIU Economist Intelligence Unit PRS Political Risk Services International Country Risk Guide WMO Global Insight Business Condition and Risk Indicators GCS Global Competitiveness Report WCY Institute for Management Development World Competitiveness Yearbook GWP Gallup World Poll EGV Global E-Governance Index BPS Business Enterprise Environment Survey xv

16 BTI IPD FRH GII GCB HER HUM TPR OBI MSIª Bertelsmann Transformation Index Institutional Profiles Database Freedom House Global Integrity Index Global Corruption Barometer Survey Heritage Foundation Index of Economic Freedom Cingranelli Richards Human Rights Database US State Department Trafficking in People report International Budget Project Open Budget Index International Research & Exchanges Board Media Sustainability Index For a more thorough look at each individual indicators, see: Factor analyses results 1. Government Effectiveness (GE) Factor analysis/correlation Number of obs = 27 Method: principal-component factors Retained factors = 1 Rotation: (unrotated) Number of params = 9 Factor Eigenvalue Difference Proportion Cumulative Factor Factor Factor Factor Factor Factor Factor Factor Factor GE Weights from FA: Variable Factor Sq. Factor Weight BRI DRI EIU PRS WMO GCS GWP WCY EGV xvi

17 total Control of Corruption (CC) Factor analysis/correlation Number of obs = 27 Method: principal-component factors Retained factors = 1 Rotation: (unrotated) Number of params = 9 Factor Eigenvalue Difference Proportion Cumulative Factor Factor Factor Factor Factor Factor Factor Factor Factor Factor weights for CC: Rule of Law (RL) Variable Factor Sq. Factor Weight BRI DRI EIU GAD PRS WMO GCS GWP WCY total Factor analysis/correlation Number of obs = 27 Method: principal-component factors Retained factors = 2 Rotation: (unrotated) Number of params = 23 Factor Eigenvalue Difference Proportion Cumulative Factor Factor Factor Factor Factor Factor xvii

18 Factor Factor Factor Factor Factor Factor LR test: independent vs. saturated: chi2(66) = Prob>chi2 = Figure 1 Correlations among Rule of Law Indicators: World Bank ICRG Fraser Inst Freedom House Note: The data is averaged from and all 27 EU-members states are available for each of the four rule of law indicators. Each indicator has been re-scaled (0-10) so that higher scores represent stronger rule of law. The pairwise correlations are accompanied by Pearson s correlation coefficients. The number of total times-series observations are found in Table 2 Figure 2 xviii

19 Correlations Among Corruption Indicators World Bank ICRG 5 CPI Freedom House Figure 3 Correlations Among Bureaucracy Indicators World Bank ICRG WVS Note: data for all EU countries is a cross-sectional average from Note: missing from the WVS question on confidence of the civil service is Cyprus xix

20 Figure 4 Correlations Among Democracy Indicators Polity IV Freedom House (political rights) Vanhanen Index.65 World Bank Freedom House/ Polity IV Note: Polity IV does not contain states under a certain population threshold, thus Luxembourg and Malta are not included in these correlation. Running the correlations without Polity IV renders near identical results. Freedom House Nations in Transit: 10 questions 1. Has the government implemented effective anticorruption initiatives? 2. Is the country's economy free of excessive state involvement? 3. Is the government free from excessive bureaucratic regulations, registration requirements, and other controls that increase opportunities for corruption? 4. Are there significant limitations on the participation of government officials in economic life? 5. Are there adequate laws requiring financial disclosure and disallowing conflict of interest? 6. Does the government advertise jobs and contracts? xx

21 7. Does the state enforce an effective legislative or administrative process-particularly one that is free of prejudice against one's political opponents-to prevent, investigate, and prosecute the corruption of government officials and civil servants? 8. Do whistle-blowers, anticorruption activists, investigators, and journalists enjoy legal protections that make them feel secure about reporting cases of bribery and corruption? 9. Are allegations of corruption given wide and extensive airing in the media? 10. Does the public display a high intolerance for official corruption? xxi

22 Appendix Part II Sensitivity test of WGI Table 2.4: Pearson's Correlation Coefficients between Underlying Data, Pillar and QoG Index Pillar Availability Indicator Index Pillar Correlation Correlation Government All (9) BRI 0.78***.76*** Effectiveness DRI 0.57***.56*** EIU 0.91***.92*** PRS 0.87***.88*** WMO 0.81***.81*** GCS 0.80***.84*** WCY 0.81***.84*** GWP 0.74*** 0.71*** EGV 0.42**.39** Regional (2) BPS BTI Limited (1) IPD 0.78***.81*** Control of All (9) BRI 0.83*** 0.83*** Corruption DRI 0.66*** 0.60*** EIU 0.91*** 0.93*** GAD 0.78*** 0.82*** PRS 0.89*** 0.94*** WMO 0.88*** 0.86*** GCS 0.92*** 0.96*** GWP 0.84*** 0.86*** WCY 0.94*** 0.95*** Regional (4) BPS BTI 0.66** 0.70** FRH 0.77*** 0.93*** GII Limited (2) IPD 0.91*** 0.92*** GCB 0.75*** 0.76*** Rule of Law All (12) BRI.89***.81*** DRI.49***.46*** EIU.94***.87*** GAD.43** 0.28 PRS.87***.73*** WMO.81***.67*** GCS.92***.80*** GWP.80***.68*** WCY.80***.72*** HER.90***.78*** HUM.63***.63*** TPR.40**.38** xxii

23 Regional (4) BPS BTI 0.94*** 0.74** GII Limited (1) IPD Voice & All (10) WMO.85***.90*** Accountability FRH.84***.85*** PRS.55***.62*** EIU.84***.92*** RSF.62***.65*** HUM ** WCY.84***.80*** GCS.92***.86*** GAD.75***.77*** GWP.69***.70*** Regional (3) BTI.86**.81*** GII OBI.71**.69** Limited (2) IPD.74***.77*** MSIª ªonly available for Bulgaria & Romania. Number of sources in parentheses under availability. For a full list and description of variable sources, see the Appendix. *** p<.01, **p<.05 Table 2.5: Nominal & effective weights of the 4 Pillars of QoG Pillars Unweighted Effective Contribution Weight Government 25% 27% Effectiveness Control of 25% 27% Corruption Rule of Law 25% 20% Voice & 25% 26% Accountability The total variance of the index score follows the simple formula of the variance of a sum with underlying weights: xxiii

24 Where a represents the weight and x the score from each pillar i to explain the overall variance of the QoG index. Figure 2.2 Cluster Means Over the 4 Pillars of QoG Cluster 1 Cluster 2 Cluster QoG(total) CC VA RoL GE Rotated (Varimax) Factor analysis/correlation Number of obs = 27 Method: principal-component factors Retained factors = 2 Rotation: orthogonal varimax (Kaiser off) Number of params = 23 Factor Variance Difference Proportion Cumulative Factor Factor Rotated factor loadings (pattern matrix) and unique variances xxiv

25 Variable Factor1 Factor2 Uniqueness bri08rls dri08rls eiu08rls gad08rls prs08rls wmo08rls gcs08rls gwp08rls wcy08rls her08rls hum08rls tpr08rls Factor Weights for RL FA weights - RL (original & squared factor loading) original FA Sq. FA loading Variable Factor 1 Factor 2 Factor 1 Factor 2 PC weights Bri Dri Eiu Gad Prs Wmo Gcs Gwp Wcy Her Hum Tpr TOTAL VAR Explain Total Voice & Accountability (VA) Factor analysis/correlation Number of obs = 27 Method: principal-component factors Retained factors = 2 Rotation: (unrotated) Number of params = 19 Factor Eigenvalue Difference Proportion Cumulative Factor Factor Factor Factor Factor xxv

26 Factor Factor Factor Factor Factor Rotated (varimax) Factor Variance Difference Proportion Cumulative Factor Factor Factor weights for VA Variable Factor 1 Factor 2 SquaredF1 SqF2 WeightFA WMO FRH PRS EIU RSF HUM WCY GCS GAD GWP total Var Factor weights for QoG Index from 4 Pillars: Factor weights Pillar factor SqFactor weight rounded GE CC VA RL Total Hierarchical clustering, using Ward s method & squared Euclidian distancing xxvi

27 0.5 QoGfacW Clusters of EU Countries Based on QoG SWEDEN DENMARK FINLAND NETHERLANDS CZECH REPUBLIC LITHUANIA HUNGARY SLOVAKIA POLAND LATVIA GREECE ITALY PORTUGAL FRANCE BELGIUM MALTA SPAIN CYPRUS ESTONIA SLOVENIA GERMANY IRELAND AUSTRIA UNITED KINGDOM LUXEMBOURG BULGARIA ROMANIA Cluster Group (Squared Euclidian difference) Full Uncertainty Tests rfom Simulations Table 2.8: Frequency Matrix of a EU Country's Rankings: Rule of Law Original Rank Country 1,2 3,4 5,6 7,8 9,10 11,12 13,14 15,16 17,18 19,20 21,22 23,24,25 26,27 1 Denmark Austria Sweden Finland Lux Netherlands Ireland Germany United Kingdom Malta France Belgium Spain Cyprus Portugal Estonia Slovenia Cz. Rep Hungary Greece Latvia xxvii

28 22 Lithuania Poland Slovakia Italia Romania Bulgaria 100 note: Frequencies are calculated from the 78 simulations with alternative aggregation, weighting and removing one indicator at a time For example, Finland ranks in either the 3rd or 4th position 78% of the time, while 1st or 2nd 18% of the time. Frequencies under 5% are not shown. All figures rounded to the nearest percent. Bold numbers represent a majority of simulation results equaling a country s original rank position. Table 2.10: Frequency Matrix of a EU Country's Rank Original Rank Country 1,2 3,4 5,6 7,8 9,10 11,12 13,14 15,16 17,18 19,20 21,22 23,24,25 26,27 1 DENMARK SWEDEN FINLAND NETHERLANDS AUSTRIA UNITED KINGDOM GERMANY LUXEMBOURG FRANCE IRELAND BELGIUM MALTA CYPRUS ESTONIA PORTUGAL CZECH REPUBLIC SLOVENIA SPAIN SLOVAKIA HUNGARY LITHUANIA LATVIA GREECE POLAND ITALY BULGARIA ROMANIA 100 note: Frequencies are calculated from the 78 simulations with alternative aggregation, weighting and removing one indicator at a time For example, Finland ranks in either the 3rd or 4th position 75% of the time, while 5th or 6th 24% of the time. Frequencies under 5% are not shown Table 2.12 : Frequency Matrix of a EU Country's Corruption Rank Original Rank Country 1,2 3,4 5,6 7,8 9,10 11,12 13,14 15,16 17,18 19,20 21,22 23,24,25 26,27 1 FINLAND 97 xxviii

29 2 DENMARK SWEDEN NETHERLANDS 99 5 LUXEMBOURG 99 6 AUSTRIA GERMANY IRELAND UNITED KINGDOM FRANCE BELGIUM SPAIN PORTUGAL CYPRUS MALTA SLOVENIA ESTONIA HUNGARY SLOVAKIA POLAND CZECH REPUBLIC LATVIA LITHUANIA ITALY GREECE ROMANIA BULGARIA 100 note: Frequencies are calculated from the 60 simulations with alternative aggregation, weighting and removing one indicator at a time Frequencies under 5% are not shown. Bold numbers represent a majority of simulation results equaling a country s original rank position. Table 2.14: Frequency Matrix of a EU Country's Voice & Accountability Rank Original Rank Country 1,2 3,4 5,6 7,8 9,10 11,12 13,14 15,16 17,18 19,20 21,22 23,24,25 26,27 1 Sweden Netherlands Lux Denmark Finland Ireland 99 7 Belgium Austria Germany United Kingdom France Malta Portugal Spain Estonia Cz. Rep Slovenia xxix

30 18 Hungary Cyprus Italia Slovakia Greece Latvia Poland Lithuania Bulgaria Romania note: Frequencies are calculated from the 66 simulations with alternative aggregation, weighting and removing one indicator at a time. Frequencies under 5% are not shown. Bold numbers represent a majority of simulation results equaling a country s original rank position. Full Sensitivity Results from Simulations (from section 5) Sensitivity Analysis: Impact of Assumptions of Weighting, Aggregation and Exclusion of Single Indicators on Rule of Law Scenario Aggregation Weighting Excluded Median Max Spearman Indicator 1 Arithmetic Original None Arithmetic Original Bri Arithmetic Original Dri Arithmetic Original Eiu Arithmetic Original Gad Arithmetic Original Prs Arithmetic Original Wmo Arithmetic Original Gcs Arithmetic Original Gwp Arithmetic Original Wcy Arithmetic Original Her Arithmetic Original Hum Arithmetic Original Tpr Arithmetic Equal None 1 5 (Italy+) Arithmetic Equal Bri Arithmetic Equal Dri 1 5 (Italy+) Arithmetic Equal Eiu 1 5 (Italy+) Arithmetic Equal Gad 1 5 (Italy+) Arithmetic Equal Prs 2 5 (Italy+) Arithmetic Equal Wmo 2 5 (Italy+) Arithmetic Equal Gcs 1 5 (Italy+) Arithmetic Equal Gwp 1 5 (Hungary+) Arithmetic Equal Wcy 2 5 (Italy+) Arithmetic Equal Her 1 5 (Italy+) Arithmetic Equal Hum 1 5 (Italy+) Arithmetic Equal Tpr Arithmetic FA None Arithmetic FA Bri 1 5 (Italy+) Rank Coefficient xxx

31 29 Arithmetic FA Dri 1 5 (Italy+) Arithmetic FA Eiu 1 6 (Slovenia+) Arithmetic FA Gad Arithmetic FA Prs 1 5 (Italy+) Arithmetic FA Wmo 1 5 (Italy+) Arithmetic FA Gcs 1 5 (Italy+) Arithmetic FA Gwp 2 5 (Hungary+) Arithmetic FA Wcy 2 5 (Italy+) Arithmetic FA Her 1 5 (Italy+) Arithmetic FA Hum 1 5 (Italy+) Arithmetic FA Tpr Geometric Original None 1 5 (Hun+) Geometric Original Bri Geometric Original Dri 1 5 (Italy+) Geometric Original Eiu 1 5 (Italy, Hun. +) Geometric Original Gad 1 5 (Italy, Hun. +) Geometric Original Prs 1 5 (Italy+) Geometric Original Wmo 2 5 (Italy, Hun. +) Geometric Original Gcs 1 5 (Italy+) Geometric Original Gwp 1 5 (Italy, Hun. +) Geometric Original Wcy 1 5 (Italy+) Geometric Original Her 1 5 (Italy, Hun.+) Geometric Original Hum 1 5 (Hun+) Geometric Original Tpr 1 5 (Hun+) Geometric Equal None 1 5 (Italy+) Geometric Equal Bri Geometric Equal Dri 1 5 (Italy+) Geometric Equal Eiu 1 5 (Italy, Hun+) Geometric Equal Gad 1 5 (Italy+) Geometric Equal Prs 1 5 (Italy+) Geometric Equal Wmo 2 5 (Italy+) Geometric Equal Gcs 1 5 (Italy+) Geometric Equal Gwp 1 5 (Hungary+) Geometric Equal Wcy 1 5 (Italy+) Geometric Equal Her 1 5 (Italy+) Geometric Equal Hum 1 5 (Italy+) Geometric Equal Tpr Geometric FA None 1 5 (Italy+) Geometric FA Bri Geometric FA Dri 1 5 (Italy+) Geometric FA Eiu 1 5 (Italy+) Geometric FA Gad 1 5 (Italy+) Geometric FA Prs 1 5 (Italy+) Geometric FA Wmo 2 5 (Italy+) Geometric FA Gcs 1 5 (Italy+) Geometric FA Gwp 1 5 (Hungary +) Geometric FA Wcy 1 5 (Italy+) Geometric FA Her 1 5 (Italy+) Geometric FA Hum 1 5 (Italy+) Geometric FA Tpr xxxi

32 Sensitivity Analysis: Impact of Assumptions of Weighting, Aggregation and Exclusion of Single Indicators on Corruption Scenario Aggregation Weighting Excluded Median Max Spearman Indicator Rank Coefficient 1 Arithmetic Original None Arithmetic Original Bri Arithmetic Original Dri Arithmetic Original Eiu Arithmetic Original Gad Arithmetic Original Prs Arithmetic Original Wmo Arithmetic Original Gcs Arithmetic Original Gwp Arithmetic Original Wcy Arithmetic Equal None Arithmetic Equal Bri Arithmetic Equal Dri Arithmetic Equal Eiu Arithmetic Equal Gad Arithmetic Equal Prs Arithmetic Equal Wmo Arithmetic Equal Gcs Arithmetic Equal Gwp Arithmetic Equal Wcy Arithmetic FA None Arithmetic FA Bri Arithmetic FA Dri Arithmetic FA Eiu Arithmetic FA Gad Arithmetic FA Prs Arithmetic FA Wmo Arithmetic FA Gcs Arithmetic FA Gwp xxxii

33 30 Arithmetic FA Wcy Geometric Original None Geometric Original Bri Geometric Original Dri Geometric Original Eiu Geometric Original Gad Geometric Original Prs Geometric Original Wmo Geometric Original Gcs Geometric Original Gwp Geometric Original Wcy Geometric Equal None Geometric Equal Bri Geometric Equal Dri Geometric Equal Eiu Geometric Equal Gad Geometric Equal Prs Geometric Equal Wmo Geometric Equal Gcs Geometric Equal Gwp Geometric Equal Wcy Geometric FA None Geometric FA Bri Geometric FA Dri Geometric FA Eiu Geometric FA Gad Geometric FA Prs Geometric FA Wmo Geometric FA Gcs Geometric FA Gwp Geometric FA Wcy xxxiii

34 Sensitivity Analysis: Impact of Assumptions of Weighting, Aggregation and Exclusion of Single Indicators on Government Effectiveness Scenario Aggregation Weighting Excluded Median Max Spearman Indicator Rank Coefficient 1 Arithmetic Original None Arithmetic Original Bri Arithmetic Original Dri Arithmetic Original Eiu Arithmetic Original Prs Arithmetic Original Wmo Arithmetic Original Gcs Arithmetic Original Gwp Arithmetic Original Wcy Arithmetic Original Egv Arithmetic Equal None 1 6 (Slovak -) Arithmetic Equal Bri 2 6 (Slovak -) Arithmetic Equal Dri 1 6 (Slovak, Italy+)) Arithmetic Equal Eiu 1 6 (Slovak, Italy+)) Arithmetic Equal Prs 2 6 (Slovak, Italy+)) Arithmetic Equal Wmo 2 6 (Slovak -) Arithmetic Equal Gcs 2 7 (Ireland+) Arithmetic Equal Gwp 2 5 (Hungary-) Arithmetic Equal Wcy 2 6 (Slovak -) Arithmetic Equal Egv 1 5 (Slovak-) Arithmetic FA None 1 5 (Spain+) Arithmetic FA Bri Arithmetic FA Dri 1 5 (Spain+) Arithmetic FA Eiu 1 5 (Spain, Bel+) Arithmetic FA Prs 1 5 (Spain+) Arithmetic FA Wmo 2 5 (Bel+) Arithmetic FA Gcs 2 5 (Spain+) Arithmetic FA Gwp Arithmetic FA Wcy 2 5 (Sp, Pol+, Lat-) Arithmetic FA Egv 1 5 (Spain+) Geometric Original None 1 6 (Slovak-) Geometric Original Bri 1 6 (Slovak-) Geometric Original Dri 1 6 (Slovak, Italy+)) Geometric Original Eiu 2 7 (Italy+) xxxiv

35 35 Geometric Original Prs 2 6 (Slovak, Italy+)) Geometric Original Wmo 2 6 (Slovak, Pol.+) Geometric Original Gcs 2 7 (Ireland+) Geometric Original Gwp 2 8 (Slovenia-) Geometric Original Wcy 2 7 (Italy+) Geometric Original Egv 1 5 (Spain+) Geometric Equal None 1 6 (Slovak -) Geometric Equal Bri 1 6 (Slovak -) Geometric Equal Dri 1 6 (Slovak, Italy+)) Geometric Equal Eiu 2 7 (Italy+) Geometric Equal Prs 2 6 (Slovak, Italy+)) Geometric Equal Wmo 2 6 (Poland+) Geometric Equal Gcs 2 7 Ireland (+) Geometric Equal Gwp Geometric Equal Wcy 2 7 (Italy+) Geometric Equal Egv 1 5 (Spain+) Geometric FA None 1 5 (Spain+) Geometric FA Bri Geometric FA Dri 1 5 (Spain+, Slovak-) Geometric FA Eiu 2 6 (Slovak-) Geometric FA Prs 2 5 (Spain+) Geometric FA Wmo 1 5 (Bel+, Slovak-) Geometric FA Gcs 2 5 (Poland+) Geometric FA Gwp 2 7 (Italy+) Geometric FA Wcy 1 5 (Spain+) Geometric FA Egv xxxv

36 Sensitivity Analysis: Impact of Assumptions of Weighting, Aggregation and Exclusion of Single Indicators on Voice & Accountability Scenario Aggregation Weighting Excluded Median Max Spearman Indicator 1 Arithmetic Original None Arithmetic Original WMO Arithmetic Original FRH 1 5 (Poland+) Arithmetic Original PRS Arithmetic Original EIU Arithmetic Original RSF Arithmetic Original HUM Arithmetic Original WCY Arithmetic Original GCS Arithmetic Original GAD Arithmetic Original GWP Arithmetic Equal None 2 9 (Cyprus+) Arithmetic Equal WMO 2 11 (Cyprus+) Arithmetic Equal FRH 2 9 (Cyprus+) Arithmetic Equal PRS 2 9 (Cyprus+) Arithmetic Equal EIU 2 10 (Cyprus+) Arithmetic Equal RSF 1 11 (Cyprus+) Arithmetic Equal HUM 2 9 (Cyprus+) Arithmetic Equal WCY 2 10 (Cyprus+) Arithmetic Equal GCS 2 9 (Cyprus+) Arithmetic Equal GAD 2 10 (Cyprus+) Arithmetic Equal GWP 1 6 (Latvia +) Arithmetic FA None 2 9 (Cyprus+) Arithmetic FA WMO 2 11 (Cyprus+) Arithmetic FA FRH 2 9 (Cyprus+) Arithmetic FA PRS 2 9 (Cyprus+) Arithmetic FA EIU 2 10 (Cyprus+) Arithmetic FA RSF 2 9 (Cyprus+) Arithmetic FA HUM 2 10 (Cyprus+) Arithmetic FA WCY 1 11 (Cyprus+) Arithmetic FA GCS 2 8 (Cyprus+) Arithmetic FA GAD 2 10 (Cyprus+) Arithmetic FA GWP 1 6 (Latvia +) Geometric Original None 2 5 (Cyprus+) Geometric Original WMO 2 7 (Cyprus+) Geometric Original FRH 2 5 (Cyprus+) Geometric Original PRS 2 6 (Cyprus+) Rank Coefficient xxxvi

37 38 Geometric Original EIU 2 6 (Cyprus+) Geometric Original RSF 2 6 (Cyprus+) Geometric Original HUM 2 6 (Cyprus+) Geometric Original WCY Geometric Original GCS 1 6 (Pol. +) Geometric Original GAD 1 6 (Cyprus+) Geometric Original GWP Geometric Equal None 2 5 (Cyp, Pol.+, Hun-) Geometric Equal WMO 2 6 (Cyprus +) Geometric Equal FRH 2 5 (Cyp, Pol.+, Hun-) Geometric Equal PRS 2 6 (Cyprus+) Geometric Equal EIU 2 5 (Cyp, Pol. +) Geometric Equal RSF 2 5 (Cyp, Pol.+, Hun-) Geometric Equal HUM 2 6 (Cyprus+) Geometric Equal WCY Geometric Equal GCS 1 6 (Poland+) Geometric Equal GAD 2 6 (Cyprus+) Geometric Equal GWP Geometric FA None 2 5 (Cyprus+) Geometric FA WMO 2 7 (Cyprus+) Geometric FA FRH 2 5 (Cyprus+) Geometric FA PRS 2 6 (Cyprus+) Geometric FA EIU 2 6 (Cyprus+) Geometric FA RSF 2 5 (Cyp, Pol. +) Geometric FA HUM 2 6 (Cyprus+) Geometric FA WCY Geometric FA GCS 1 6 (Poland+) Geometric FA GAD 2 6 (Cyprus+) Geometric FA GWP Regressions from part 2.6 external validity checks (QoG as DV) GDP (7.86)** Social Capital (5.10)** Inequality (2.25)* xxxvii

38 Child Mortality (5.50)** population (-0.27) Constant (3.86)** (10.98)** (7.78)** Observations R-squared Absolute value of t statistics in parentheses * significant at 5%; ** significant at 1% xxxviii

39 Appendix: Part III Measuring QoG at the Regional Level List of Regions, Nuts Codes, and Region Code in the E.U. Regional Dataset Region Nuts Code Number Region Nuts Code Number Region Nuts Code Number Austria AT 1 Franche-Comte FR43 65 Dolnoslaskie PL Burgenland AT11 2 Pays de la Loire FR51 66 Opolskie PL Niederöstrerreich AT12 3 Bretagne FR52 67 Kujawsko-Pomorskie PL Wien AT13 4 Poitou-Charentes FR53 68 Warminsko-Mazurskie PL Kärnten AT21 5 Aquitaine FR61 69 Pomorskie PL Kärnten AT21 6 Midi-Pyrenees FR62 70 Portugal PT 134 Oberösterreich AT31 7 Limousin FR63 71 Norte PT Salzburg AT32 8 Rhone-Alpes FR71 72 Algarve PT Tirol AT33 9 Auvergne FR72 73 Centro PT Voralberg AT34 10 Languedoc-Roussillon FR81 74 Lisboa PT Belgium BE 11 Provence-Alpes-Cote d'azur FR82 75 Alentejo PT Brussels BE1 12 Corse FR83 76 Região Autónoma dos Açores PT Vlaams Gewest BE2 13 Guadeloupe FR91 77 Região Autónoma da Madeira PT Wallonie BE3 14 Martinique FR92 78 Romania RO 142 Bulgaria BG 15 Guyane FR93 79 Nord-Vest RO Severozapaden BG31 16 Reunion FR94 80 Centru RO Severen Tsentralen BG32 17 Greece GR 81 Nord-Est RO Severoiztochen BG33 18 Voreia Ellada GR1 82 Sud-Est RO Yugoiztochen BG34 19 Kentriki Ellada GR2 83 Sud-Muntenia RO Yugozapaden BG41 20 Attica GR3 84 Bucuresti-Ilfov RO Yuzhen Tsentralen BG42 21 Nisia Aigaiou-Kriti GR4 85 Sud-Vest Oltenia RO Czech Rep. CZ 22 Hungary HU 86 Vest RO Praha CZ01 23 Közép-Magyarország HU1 87 Slovakia SK 151 Stredni Cechy CZ02 24 Dunántúl HU2 88 Bratislavský kraj SK Jihozapad CZ03 25 Észak és Alföld HU3 89 Západné Slovensko SK Severozapad CZ04 26 Italy IT 90 Stredné Slovensko SK Severovychod CZ05 27 Piemonte ITC1 91 Východné Slovensko SK Jihovychod CZ06 28 Valle d'acosta ITC2 92 Spain ES 156 Stedni Morava CZ07 29 Ligura ITC3 93 Galicia ES Moravskoslezsko CZ08 30 Lombardia ITC4 94 Principado de Asturias ES Denmark DK 31 Bolzano ITD1 95 Cantabria ES Hovedstaden DK01 32 Trento ITD2 96 Pais Vasco ES Sjaelland DK02 33 Veneto ITD3 97 Comunidad Foral de Navarra ES Syddanmark DK03 34 Friuli-Venezia Giulia ITD4 98 La Rioja ES Midtylland DK04 35 Emilia-Romagna ITD5 99 Aragón ES Nordjylland DK05 36 Toscana ITE1 100 Comunidad de Madrid ES Germany DE 37 Umbria ITE2 101 Castilla y León ES Baden Wuttemberg DE1 38 Marche ITE3 102 Castilla-La Mancha ES Bavaria DE2 39 Lazio ITE4 103 Extremadura ES Berlin DE3 40 Abruzzo ITF1 104 Cataluña ES Brandenburg DE4 41 Molise ITF2 105 Comunidad Valenciana ES Bremen DE5 42 Campania ITF3 106 Illes Balears ES Hamburg DE6 43 Puglia ITF4 107 Andalucia ES Hessen DE7 44 Basilicata ITF5 108 Región de Murcia ES xxxix

40 Mecklenburg-Vorpommen DE8 45 Calabria ITF6 109 Ciudad Autónoma de Ceuta ES Lower Saxony DE9 46 Sicilia ITG1 110 Ciudad Autónoma de Melilla ES North Rhine Westphalia DEA 47 Sardegna ITG2 111 Canarias (ES) ES Rhineland-Palatinate DEB 48 Netherlands NL 112 Sweden SE 176 Saarland DEC 49 Noord-Nederland NL1 113 Östra Sverige SE1 177 Saxony DED 50 Oost-Nederland NL2 114 Södra Sverige SE2 178 Saxony-Anhalt DEE 51 West-Nederland NL3 115 Norra Sverige SE3 179 Schleswig-Holstein DEF 52 Zuid-Nederland NL4 116 United Kingdom UK 180 Thuringia DEG 53 Poland PL 117 Northeast England UKC 181 France FR 54 Lodzkie PL Northwest England UKD 182 Ile-de-France FR10 55 Mazowieckie PL Yorkshire-Humber UKE 183 Champagne-Ardenne FR21 56 Malopolskie PL East Midland England UKF 184 Picardie FR22 57 Slaskie PL West Midland England UKG 185 Haute-Normandie FR23 58 Lubelskie PL East of England UKH 186 Centre FR24 59 Podkarpackie PL London UKI 187 Basse-Normandie FR25 60 Swietokrzyskie PL South East England UKJ 188 Bourgogne FR26 61 Podlaskie PL South West England UKK 189 Nord - Pas-de-Calais FR30 62 Wielkopolskie PL Wales UKL 190 Lorraine FR41 63 Zachodniopomorskie PL Scotland UKM 191 Alsace FR42 64 Lubuskie PL Northern Ireland UKN 192 Table 1: Demographic & Background Data (n= 33,540) Question Content Proportion of sample Experience in last 12 months: Education 0.60 Health care 0.25 Law enforcement 0.78 All None of the Income Low 0.38 Medium 0.37 High 0.14 Education Secondary or less 0.49 University 0.35 Advanced degree 0.14 xl

41 Population 10,000 or less , , ,000-1 million million Age Religion Christian 0.56 Secular 0.17 Muslim 0.01 Other 0.26 Gender Male 0.55 Female 0.45 Language: mother tongue same as official language in region? yes 0.95 no 0.05 Table 4: Pairwise Person Correlations Note: significant relationships at the 95% level of confidence are in bold VARIABLE Ed. Qual. Health Qual Law Qual Ed. Impart Hel. Qual. Law Qual. Ed. Impart1 Hel. Impart1 Law Impart1 Ed. Impart2 Hel. Impart2 Law Impart2 Health Impart Law Impart Ed. Impart Health Impart Law Impart Ed. Cor Health Cor Law Cor Others Cor Elections Media HealthBribe VARIABLE Ed. Cor. Hel. Cor. Law Cor. Others Cor. Elections Media xli

42 Health Qual. Law Qual. Ed. Impart1 Health Impart1 Law Impart1 Ed. Impart2 Health Impart2 Law Impart2 Ed. Cor. 1 Health Cor Law Cor Others Cor Elections Media HealthBribe Table 3: Multiple Regression (by Pillar) with Individual Level Data Quality Impartialiy Corruption QoG Total Experience Education -.08*** -.05** -.03* -.04* Health -.06**.04* Law Enforcement.12**.08**.07**.08** Income (low = comparison group) High.22**.09**.16**.12** Medium.13**.06**.08**.08** Education (low = comparison group) High -.14**.04*.17**.05** Medium -.07**.15**.16**.07** Age (18-29 = comparison group) * n.02.08**.03** *.08**.15**.09** **.23**.19**.15** Population (>10,000 = comparison group) 10, , ** -.05* -.12** -.07** 100,000-1 million -.14** ** -.05** 1 million ** -.24** -.48** -.30** Other Demographic Indicators Muslim * Different mother tongue * Female -.15**.08** xlii

43 Satisfaction with the current: Economy.05**.04**.03**.03** Government.03**.02**.02**.02** Constant -.43** -.23** -.31** -.31** Rsq Observations note: OLS with robust standard errors. All dependent variables are set up such that higher scores equate to better QoG (less corruption, more impartiality, etc.). ** p <.01, * p <.05 Chronbach s Alpha coefficient is defined as the following: cov( xi, x j ) var( x j ) Q i j Q j c 1 c = 1,, M; i, j =1; ;Q (1) Q 1 var( xo ) Q 1 var( xo) The FA model is given by: x x 1... Q F 11 Q1 1 F 1 22 F Q2 2 F m... F Qm m F e m 1 e Q (2) For the FA, all variables are standardized, so as to have a common mean of 0 and a standard deviation of 1. Thus x i ( i 1,..., Q) represents the standardized variables and i1,..., im equate to the factor loadings which relate to the variable X i; F1,...; Fm, which are m uncorrelated with common factors with a 0 mean and unit variance. The e i are the Q-specific factors, which also has a 0 mean, are independently and identically distributed (OECD 2008). PC Eigenvalue % of Total Var xliii

44 The formula for Standardization is: I t qc x t qc x t qc c t qc c (3) The formula for min-mx is: I t qc x max t qc c min ( x t q c ( x ) min t q c ) ( x t q ) (4) We employ the following formula for aggregation and weigting: CI c Q q wq I 1 qc q w q Whereby the sum of the weights equals one ( 1) and the weights are bound between 0 and 1. In later tests of sensitivity, we also aggregate the indicators using geometric aggregation. (5) Table 9: Weighting Scheme by Indicator and Pillar Indicator Pillar Pillar weight Equal Weight Factor weight W/in Pillar weight w/ Pillar of Total EdQual Quality 33.33% 20% 22.93% 4.89% HealthQual 20% 12.52% 2.67% LawQual 20% 38.15% 8.14% Media 20% 21.62% 4.61% Election 20% 11.09% 1.64% EdImpartial1 Impartiality 33.33% 16.67% 21.33% 9.51% HealthImpartial % 15.78% 7.04% LawImpartial % 20.42% 9.10% EdImpartial % 15.38% 6.86% xliv

45 HealthImpartial % 6.67% 2.97% LawImpartial % 20.41% 9.10% EdCorrupt Corruption 33.33% 20% 21.46% 8.21% HealthCorrupt 20% 30.59% 11.70% LawCorrupt 20% 6.91% 2.64% OthersCorrupt 20% 27.62% 10.56% Health Sector Bribe 20% 13.43% 5.14% Table 10: Complete list of Regional QoG by Rank Order xlv

46 Rank region euqogindex Rank region euqogindex Rank region euqogindex Rank region euqogindex 1 DK DE FR PL DK DE FR PL DK DE FR RO NL ES FR RO DK AT PT PL DK DE FR PL ITD DE FR FR ITC DE FR PL SE AT CZ PL UKM ES FR PL NL DE FR PL UKF ITE ITG PT ITD ES ITF HU SE UKI RO PL NL AT ES RO SE ES FR PL UKK DEE CZ HU UKJ ES BE ITF NL DEB FR CZ UKD ES RO CZ BE FR PT FR UKN ES CZ ITG UKC ES FR GR DEG ITD FR PT AT ES FR FR ITD DEA PL FR ES DE RO BG DEF ITE CZ BG UKL ITD FR ITF UKG DE FR HU ES ITC ITF ITF AT ES PL RO AT FR ITF GR UKH ITE ITE SK ES FR PT GR AT ES CZ SK DED RO PT SK UKE FR PL SK AT BE CZ BG ES FR PL GR DEC ITC PL BG AT ES PT BG ITC FR PL BG31 Note: country names inserted into the chart represent the average score of all regions represented in the survey data The data is standardized so that the mean QoG regional index score is 0 with a standard deviation of 1 xlvi

47 Figure 3: Regional Variation in Italy Margins of Error 1. We begin by assuming a normal distribution of the sample so that we may use the Central Limit Theorem. We know from basic statistical probability that in a sample x, 95% of the area of a basic normal Bell curve are between our estimate (µ) 1.96+/- the standard error around µ. We calculate the standard error as: S.E. = error for each individual region is based around the QoG estimate: xlvii The margin of n / with N = 16, because there are 16 indicators in the QoG index which have been aggregated from the survey data. Each region thus has their own individual margin of error based on the consistency of the estimates for each of the 16 aggregated questions in n