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Can the World Bank’s Global Competitiveness Index be manipulated?

On January 15th past World Bank (WB) chief economist Paul Romer said that the competitiveness index may have been marred for political reasons. A day later, in his blog entitled, “My Unclear Comments about the Doing Business Report” he recoiled and then the WB reaffirmed the quality and objectivity of the figures.

But, how possible is to fabricate figures or indices? The incident is a good example to evidence that establishing and presenting indices is always open to the subjective views of the author. Therefore, it is unavoidable for political factors to intervene.

There are four aspects of the index which allow analyzing the manipulation possibilities:

  • All indices have a subjective element
  • Indices are susceptible to improve progressively
  • As indices change, every year’s scores are not strictly comparable to previous years 
  • Presenting of results depends to regulation criteria and therefore they are not neutral

The subjective element of indices

Calculations are partial approaches to reality and are determined by the priorities of the researcher. In this particular case they are determined by the WB. However, the principle used to organize reality is subjective, and this is reflected in choosing the areas that go into establishing the Doing Business Report (DB) and the manner in which variables are weighed within each area. The DB index includes 11 areas related to the procedures and limitation of each country for:

  • Starting a business

  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credits
  • Protecting minority investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Resolving insolvency
  • Labor market regulation

The decisions that need to be taken to value each of these areas (subindices) are somewhat arbitrary and therefore debatable. For instance, it is impossible to have an agreement on the way of measuring how to protect minority investors.

Indices may improve from year to year

Measurements improve because the subindices are increased or reduced, the criteria is changed to quantify a variable or because the weightings are modified.

The most significant methodology change to subindices was ”trading across borders”, during the last year Chilean President Sebastian Piñera changed the method making Chile improve 5 places in the ranking.

Romer said that the changes to the DB during the administration of Michelle Bachelet (2014-2018), of the socialist party, the position of Chile worsened, but during the last year of Piñera’s administration, the ranking passed from 46 to 41.

The most significant methodology change to subindices was ”trading across borders”, during the last year Chile President Sebastian Piñera changed the method making Chile improve 5 places in the ranking.

In 2017, when Bachelet was in office, the ranking of Chile, without changes to the index was 48. But the published data, which included method changes, ranked it in 57th place. In 2018 the positions before and after the methodology change were 51 and 55 respectively. Therefore the 2017 and 2018 variations worsened the ranking of Chile.

Clearly, the data treatment during the administrations of Piñera and Bachelet was different. Justly, Romer questions, “Why does the ranking with Piñera improve the ranking of Chile while with Bachelet it worsens? Is it that the WB seeks to favor Piñera’s Chile over Bachelet´s? Romer hints that a lack of consistency may be due to political biases in favor or Piñera and against Bachelet.

Doubts on the explanation of the WB

In its reply to Romer, the WB says the reading between years responds to a different historical sequence. It continues saying the position 41 of 2014 is explained because in relative terms, Chile improved more than other countries, and the position 57 of 2017 is because Chile progressed less than other countries, although Romer doubts this is an appropriate explanation.

Results are not neutral

The way results are presented always has a bias and it looks like the WB is in favor of Piñera. The way indicators are presented is not balanced because they are tainted with a valued intentionality.

The WB has tried to deny that there are subjective criteria and says the indices are objective processes, exempt from value. The position is naïve because it is unavoidable for researcher perceptions to respond to their own global perception. Romer’s claims show that the WB went too far and that the political bias was evident.

Consejo Editorial