Hating on the Hurdle: Reforming the Millennium Challenge Corporation’s Approach to Corruption

The Millennium Challenge Corporation is a US agency that provides results-oriented assistance to low- and lower-middle income countries that exhibit strong performance on a number of measures of development. Among these measures is the Worldwide Governance Indicator for control of corruption. A country must score in the top half of its income group on control of corruption to pass the overall selection procedure. This paper examines the empirical underpinning of this “corruption hard hurdle.” It suggests the following: (1) the control of corruption indicator reflects broad perceptions o f governance with some noise, risking considerable errors of inclusion and exclusion; (2) the control of corruption indicator is not strongly related to progress in development outcomes, nor are country-level governance indicators strong determinants of aid project performance; and (3) the control of corruption indicator changes slowly over time, with an opaque relationship to reform efforts. The paper suggests abandoning the corruption hard hurdle and using in its place country- and sector-specific indicators of the quality of governance that are amenable to policy reform.

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