Guide to the MCC Indicators for Fiscal Year 2023

Introduction

Each year, the MCC Board of Directors (Board) selects countries as eligible for MCC assistance. The selection process begins with the Board identifying candidate countries to consider; which, by law, are all countries with per capita incomes below the World Bank’s threshold between lower middle income countries and upper middle income countries that are not prohibited from receiving assistance by federal law. For a candidate country to then be selected as eligible to receive assistance, it must demonstrate a commitment to just and democratic governance, investing in its people, and economic freedom as measured by independent policy indicators. These indicators inform the Board of candidate countries’ broad policy framework for encouraging poverty reduction through economic growth.

These indicators are compiled into country scorecards. This is a guide to understanding and interpreting the indicators used on the country scorecards by MCC in Fiscal Year 2023. It provides an overview of the policies measured by the indicators, the relationship that these policies have to economic growth and poverty reduction, the methodologies used by the various indicator institutions to measure policy performance, descriptions of the underlying source(s) of data, and the contact information of the indicator institutions. This document also provides the specific information for how MCC constructs the final indicators from these sources. The scorecards produced using these indicators are available at: https://www.mcc.gov/who-we-fund/scorecards.

For general questions about the application of these indicators, please contact MCC’s Selection, Eligibility, and Policy Performance Division at DevelopmentPolicy@mcc.gov.

Indicators—What They Measure

MCC favors indicators that:

1. are developed by an independent third party,
2. use an analytically-rigorous methodology and objective, high-quality data,
3. are publicly available,
4. have broad country-coverage among MCC candidate countries,
5. are comparable across countries,
6. have a clear theoretical or empirical link to economic growth and poverty reduction,
7. are policy-linked, i.e. measure factors that governments can influence, and
8. have appropriate consistency in results from year to year.

Ruling Justly

• Political Rights – Independent experts rate countries on: the prevalence of free and fair elections of officials with real power; the ability of citizens to form political parties that may compete fairly in elections; freedom from domination by the military, foreign powers, totalitarian parties, religious hierarchies and economic oligarchies; and the political rights of minority groups, among other things. Source: Freedom House
• Civil Liberties – Independent experts rate countries on: freedom of expression; association and organizational rights; rule of law and human rights; and personal autonomy and economic rights, among other things. Source: Freedom House
• Control of Corruption – An index of surveys and expert assessments that rate countries on: “grand corruption” in the political arena; the frequency of petty corruption; the effects of corruption on the business environment; and the tendency of elites to engage in “state capture,” among other things. Source: World Bank/Brookings Institution’s Worldwide Governance Indicators
• Government Effectiveness – An index of surveys and expert assessments that rate countries on: the quality of public service provision; civil servants’ competency and independence from political pressures; and the government’s ability to plan and implement sound policies, among other things. Source: World Bank/Brookings Institution’s Worldwide Governance Indicators
• Rule of Law – An index of surveys and expert assessments that rate countries on: the extent to which the public has confidence in and abides by the rules of society; the incidence and impact of violent and nonviolent crime; the effectiveness, independence, and predictability of the judiciary; the protection of property rights; and the enforceability of contracts, among other things. Source: World Bank/Brookings Institution’s Worldwide Governance Indicators
• Freedom of Information – Measures the legal and practical steps taken by a government to enable or allow information to move freely through society; this includes measures of press freedom, national freedom of information laws, and the extent to which a country is shutting down the internet or social media. Source: Access Now / Centre for Law and Democracy / Reporters Without Borders

Investing in People

• Immunization Rates – The average of DPT3 and measles immunization coverage rates for the most recent year available. Source: WHO and the United Nations Children’s Fund (UNICEF)
• Public Expenditure on Health – Total expenditures on health by government at all levels divided by gross domestic product (GDP). Source: The World Health Organization (WHO)
• Public Expenditure on Primary Education – Total expenditures on primary education by government at all levels divided by GDP. Source: The United Nations Educational, Scientific and Cultural Organization (UNESCO) Institute of Statistics and National Governments
• Girls’ Primary Education Completion Rate – The number of female students enrolled in the last grade of primary education minus repeaters divided by the population in the relevant age cohort (gross intake ratio in the last grade of primary). Source: UNESCO Institute of Statistics and National Governments
• Girls’ Secondary Education Enrollment Rate – The number of female pupils enrolled in lower secondary school, regardless of age, expressed as a percentage of the population of females in the theoretical age group for lower secondary education. Countries with a GNI per capita between $2,046 and $4,255 will be assessed on this indicator instead of Girls Primary Completion Rates. Source: UNESCO Institute of Statistics and National Governments
• Child Health – An index made up of three indicators: access to improved water, access to improved sanitation, and child (ages 1-4) mortality. Source: The Center for International Earth Science Information Network and the Yale Center for Environmental Law and Policy
• Natural Resource Protection– Assesses a country government’s commitment to preserving biodiversity and natural habitats, responsibly managing ecosystems and fisheries, and engaging in sustainable agriculture. Source: Yale Center for Environmental Law and Policy and The Center for International Earth Science Information Network

Encouraging Economic Freedom

• Regulatory Quality – An index of surveys and expert assessments that rate countries on: the burden of regulations on business; price controls; the government’s role in the economy; and foreign investment regulation, among other areas. Source: World Bank/Brookings Institution’s Worldwide Governance Indicators
• Land Rights and Access – An index that rates countries on the extent to which the institutional, legal, and market framework provides secure land tenure and equitable access to land in rural areas and the extent to which men and women have the right to private property in practice and in law. Pass: Score must be above the median score for the income group. Source: The International Fund for Agricultural Development and Varieties of Democracy Index
• Access to Credit – An index that ranks countries based on access and use of formal and informal financial services as measured by the number of bank branches and ATMs per 100,000 adults and the share of adults that have an account at a formal or informal financial institution. Pass: Score must be above the median score for the income group. Source: Financial Development Index (International Monetary Fund) and Findex (World Bank)
• Employment Opportunity – Measures a country government’s commitment to ending slavery and forced labor, preventing employment discrimination, and protecting the rights of workers and people with disabilities. Sources: Varieties of Democracy Institute and WORLD Policy Analysis Center (UCLA)
• Trade Policy – A measure of a country’s openness to international trade based on weighted average tariff rates and non-tariff barriers to trade. Source: The Heritage Foundation’s Index of Economic Freedom
• Inflation – The most recent average annual change in consumer prices. Source: The International Monetary Fund’s (IMF) World Economic Outlook Database
• Fiscal Policy – General government net lending/borrowing as a percent of GDP, averaged over a three-year period. Net lending/borrowing is calculated as revenue minus total expenditure. Source: The IMF’s World Economic Outlook Database
• Gender in the Economy – An index that measures the extent to which laws provide men and women equal capacity to generate income or participate in the economy, including factors such as the capacity to access institutions, get a job, register a business, sign a contract, open a bank account, choose where to live, to travel freely, property rights protections, protections against domestic violence, and child marriage, among others. Pass: Score must be above the median score for the income group. Source: Women, Business, and the Law (World Bank) and the WORLD Policy Analysis Center (UCLA)

Determining MCC Candidacy

Setting the Scorecard Income Groups

Indicator Performance

1. Inflation, on which a country’s inflation rate must be under a fixed ceiling of 15 percent;
2. Immunization Rates, on which a country must have immunization coverage above 90% or the median, whichever is lower;
3. Political Rights, on which countries must score above 17; and
4. Civil Liberties, on which countries must score above 25.

Example Scorecard

Ruling Justly Category

Political Rights Indicator

Countries are rated on the following factors:

• free and fair executive and legislative elections; fair polling; honest tabulation of ballots;
• fair electoral laws; equal campaigning opportunities;
• the right to organize in different political parties and political groupings; the openness of the political system to the rise and fall of competing political parties and groupings;
• the existence of a significant opposition vote; the existence of a de facto opposition power, and a realistic possibility for the opposition to increase its support or gain power through elections;
• the participation of cultural, ethnic, religious, or other minority groups in political life;
• freedom from domination by the military, foreign powers, totalitarian parties, religious hierarchies, economic oligarchies, or any other powerful group in making personal political choices; and
• the openness, transparency, and accountability of the government to its constituents between elections; freedom from pervasive government corruption; government policies that reflect the will of the people.

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

In consultation with Freedom House, MCC considers countries with scores above 17 to be passing this indicator.

MCC Methodology

Civil Liberties Indicator

Countries are rated on the following factors:

• freedom of cultural expression, religious institutions and expression, and academia;
• freedom of assembly and demonstration, of political organization and professional organization, and collective bargaining;
• independence of the media and the judiciary;
• freedom from economic exploitation;
• protection from police terror, unjustified imprisonment, exile, and torture;
• the existence of rule of law, personal property rights, and equal treatment under the law;
• freedom from indoctrination and excessive dependency on the state;
• equality of opportunity;
• freedom to choose where to travel, reside, and work;
• freedom to select a marriage partner and determine whether or how many children to have; and
• the existence of a legal framework to grant asylum or refugee status in accordance with international and regional conventions and system for refugee protection.

Relationship to Growth and Poverty Reduction:

Source

Indicator Institution Methodology

In consultation with Freedom House, MCC considers countries with scores above 25 to be passing this indicator.

MCC Methodology

Control of Corruption Indicator

Countries are evaluated on the following factors:

• The prevalence of grand corruption and petty corruption at all levels of government;
• The effect of corruption on the “attractiveness” of a country as a place to do business;
• The frequency of “irregular payments” associated with import and export permits, public contracts, public utilities, tax assessments, and judicial decisions;
• Nepotism, cronyism and patronage in the civil service;
• The estimated cost of bribery as a share of a company’s annual sales;
• The perceived involvement of elected officials, border officials, tax officials, judges, and magistrates in corruption;
• The strength and effectiveness of a government’s anti-corruption laws, policies, and institutions;
• Public trust in the financial honesty of politicians;
• The extent to which:
  • processes are put in place for accountability and transparency in decision-making and disclosure of information at the local level;
  • government authorities monitor the prevalence of corruption and implement sanctions transparently;
  • conflict of interest and ethics rules for public servants are observed and enforced;
  • the income and asset declarations of public officials are subject to verification and open to public and media scrutiny;
  • senior government officials are immune from prosecution under the law for malfeasance;
  • the government provides victims of corruption with adequate mechanisms to pursue their rights;
  • the tax administrator implements effective internal audit systems to ensure the accountability of tax collection;
  • the executive budget-making process is comprehensive and transparent and subject to meaningful legislative review and scrutiny;
  • the government ensures transparency, open-bidding, and effective competition in the awarding of government contracts;
  • there are legal and functional protections for whistleblowers, anti-corruption activists, and investigators;
  • allegations of corruption at the national and local level are thoroughly investigated and prosecuted without prejudice;
  • government is free from excessive bureaucratic regulations, registration requirements, and/or other controls that increase opportunities for corruption;
  • citizens have a legal right to information about government operations and can obtain government documents at a nominal cost.

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

For ease of interpretation, MCC has adjusted the median for each of the two scorecard income pools to zero for all of the Worldwide Governance Indicators. Country scores are calculated by taking the difference between actual scores and the median. For example, in FY22 the unadjusted median for the scorecard category of countries with a Gross National Income (GNI) per capita between $1,966 and $4,095 on Control of Corruption was -0.46 (note, in FY23, the GNI per capita range for this scorecard category is $2,046 to $4,255). In order to set the median at zero, MCC simply adds 0.46 to each country’s score (the same thing as subtracting a negative 0.46). Therefore, as an example, Angola’s FY22 Control of Corruption score, which was originally -0.93, was adjusted to -0.47.

The FY23 scores come from the 2022 update of the Worldwide Governance Indicators dataset and largely reflect performance in calendar year 2021. Since the release of the 2006 update of the Worldwide Governance Indicators, the indicators are updated annually. Each year, the World Bank and Brookings Institution also make minor backward revisions to the historical data. Prior to 2006, the World Bank released data every two years (1996, 1998, 2000, 2002 and 2004). With the 2006 release, the World Bank moved to an annual reporting cycle and provided additional historical data for 2003 and 2005.

Government Effectiveness Indicator

Countries are evaluated on the following factors:

• competence of civil service; effective implementation of government decisions; and public service vulnerability to political pressure;
• ability to manage political alternations without drastic policy changes or interruptions in government services;
• flexibility, learning, and innovation within the political leadership; ability to coordinate conflicting objectives into coherent policies;
• the efficiency of revenue mobilization and budget management;
• the quality of transportation infrastructure, telecommunications, electricity supply, public health care provision, and public schools; the availability of online government services;
• policy consistency; the extent to which government commitments are honored by new governments;
• prevalence of red tape; the degree to which bureaucratic delays hinder business activity;
• existence of a taxpayer service and information program, and an efficient and effective appeals mechanism;
• the extent to which:
  • effective coordination mechanisms ensure policy consistency across departmental boundaries, and administrative structures are organized along functional lines with little duplication;
  • the business processes of government agencies are regularly reviewed to ensure efficiency of decision making and implementation;
  • political leadership sets and maintains strategic priorities and the government effectively implements reforms;
  • hiring and promotion within the government is based on merit and performance, and ethical standards prevail;
  • the government wage bill is sustainable and does not crowd out spending required for public services; pay and benefit levels do not deter talented people from entering the public sector; flexibility (that is not abused) exists to pay more attractive wages in hard-to-fill positions;
  • government revenues are generated by low-distortion taxes; import tariffs are low and relatively uniform, export rebate or duty drawbacks are functional; the tax base is broad and free of arbitrary exemptions; tax administration is effective and rule-based; and tax administration and compliance costs are low;
  • policies and priorities are linked to the budget; multi-year expenditure projections are integrated into the budget formulation process, and reflect explicit costing of the implications of new policy initiatives; the budget is formulated through systematic consultations with spending ministries and the legislature, adhering to a fixed budget calendar; the budget classification system is comprehensive and consistent with international standards; and off-budget expenditures are kept to a minimum and handled transparently;
  • the budget is implemented as planned, and actual expenditures deviate only slightly from planned levels;
  • budget monitoring occurs throughout the year based on well-functioning management information systems; reconciliation of banking and fiscal records is practiced comprehensively, properly, and in a timely way;
  • in-year fiscal reports and public accounts are prepared promptly and regularly and provide full and accurate data; the extent to which accounts are audited in a timely, professional and comprehensive manner, and appropriate action is taken on budget reports and audit findings.

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

For ease of interpretation, MCC has adjusted the median for each of the two scorecard income pools to zero for all of the Worldwide Governance Indicators. Country scores are calculated by taking the difference between actual scores and the median. For example, in FY22 the unadjusted median for the scorecard category of countries with a Gross National Income (GNI) per capita between $1,966 and $4,095 on Control of Corruption was -0.46 (note, in FY23, the GNI per capita range for this scorecard category is $2,046 to $4,255). In order to set the median at zero, MCC simply adds 0.46 to each country’s score (the same thing as subtracting a negative 0.46). Therefore, as an example, Angola’s FY22 Control of Corruption score, which was originally -0.93, was adjusted to -0.47.

The FY23 scores come from the 2022 update of the Worldwide Governance Indicators dataset and largely reflect performance in calendar year 2021. Since the release of the 2006 update of the Worldwide Governance Indicators, the indicators are updated annually. Each year, the World Bank and Brookings Institution also make minor backward revisions to the historical data.  Prior to 2006, the World Bank released data every two years (1996, 1998, 2000, 2002 and 2004). With the 2006 release, the World Bank moved to an annual reporting cycle and provided additional historical data for 2003 and 2005.

Rule of Law Indicator

Countries are evaluated on the following factors:

• public confidence in the police force and judicial system; popular observance of the law; a tradition of law and order; strength and impartiality of the legal system;
• prevalence of petty crime, violent crime, and organized crime; foreign kidnappings; economic impact of crime on local businesses; prevalence of human trafficking; government commitment to combating human trafficking;
• the extent to which a well-functioning and accountable police force protects citizens and their property from crime and violence; when serious crimes do occur, the extent to which they are reported to the police and investigated;
• security of private property rights; protection of intellectual property; the accuracy and integrity of the property registry; whether citizens are protected from arbitrary and/or unjust deprivation of property;
• the enforceability of private contracts and government contracts;
• the existence of an institutional, legal, and market framework for secure land tenure; equal access to land among men and women; effective management of common property resources; equitable user-rights over water resources for agriculture and local participation in the management of water resources;
• the prevalence of tax evasion and insider trading; size of the informal economy;
• independence, effectiveness, predictability, and integrity of the judiciary; compliance with court rulings; legal recourse for challenging government actions; ability to sue the government through independent and impartial courts; willingness of citizens to accept legal adjudication over physical and illegal measures; government compliance with judicial decisions, which are not subject to change except through established procedures for judicial review;
• the independence of prosecutors from political direction and control;
• the existence of effective and democratic civilian state control of the police, military, and internal security forces through the judicial, legislative, and executive branches; the police, military, and internal security services respect human rights and are held accountable for any abuses of power;
• impartiality and nondiscrimination in the administration of justice; citizens are given a fair, public, and timely hearing by a competent, independent, and impartial tribunal; citizens have the right to independent counsel and those charged with serious felonies are provided access to independent counsel when it is beyond their means; low-cost means are available for pursuing small claims; citizens can pursue claims against the state without fear of retaliation;
• protection of judges and magistrates from interference by the executive and legislative branches; judges are appointed, promoted, and dismissed in a fair and unbiased manner; judges are appropriately trained to carry out justice in a fair and unbiased manner; members of the national-level judiciary must give reasons for their decisions; existence of a judicial ombudsman (or equivalent agency or mechanism) that can initiate investigations and impose penalties on offenders;
• law enforcement agencies are protected from political interference and have sufficient budgets to carry out their mandates; appointments to law enforcement agencies are made according to professional criteria; law enforcement officials are not immune from criminal proceedings;
• the existence of an independent reporting mechanism for citizens to complain about police actions; timeliness of government response to citizen complaints about police actions.

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

For ease of interpretation, MCC has adjusted the median for each of the two scorecard income pools to zero for all of the Worldwide Governance Indicators. Country scores are calculated by taking the difference between actual scores and the median. For example, in FY22 the unadjusted median for the scorecard category of countries with a Gross National Income (GNI) per capita between $1,966 and $4,095 on Control of Corruption was -0.46 (note, in FY23, the GNI per capita range for this scorecard category is $2,046 to $4,255). In order to set the median at zero, MCC simply adds 0.46 to each country’s score (the same thing as subtracting a negative 0.46). Therefore, as an example, Angola’s FY22 Control of Corruption score, which was originally -0.93, was adjusted to -0.47.

The FY23 scores come from the 2022 update of the Worldwide Governance Indicators dataset and largely reflect performance in calendar year 2021. Since the release of the 2006 update of the Worldwide Governance Indicators, the indicators are updated annually. Each year, the World Bank and Brookings Institution also make minor backward revisions to the historical data.  Prior to 2006, the World Bank released data every two years (1996, 1998, 2000, 2002 and 2004). With the 2006 release, the World Bank moved to an annual reporting cycle and provided additional historical data for 2003 and 2005.

Freedom of Information Indicator

Relationship to Growth and Poverty Reduction

Sources and Indicator Institution Methodologies

1. Reports without Borders’ (RSF) World Press Freedom Index, https://rsf.org/en/ranking/2020. Questions regarding this indicator may be directed to index@rsf.org or +33 1 44 83 84 65

2. Centre for Law and Democracy and Access Info’s Right to Information Index, http://www.rti-rating.org/. Questions regarding this indicator may be directed to Toby Mendel at toby@law-democracy.org or +1 (902) 431-3688.

3. Access Now’s #KeepItOn Shutdown Tracker Optimization Project, https://www.accessnow.org/keepiton/. Questions regarding this indicator may be directed to Peter Micek at peter@accessnow.org or +1 (888) 414-0100.

MCC Methodology

This indicator uses a country’s score on RSF’s World Press Freedom Index (Press) as the base. In FY23, MCC uses RSF’s 2022 World Press Freedom Index, which covers events in 2021. A country’s base score may improve based on data from the Global Right to Information Rating. In FY23, MCC uses Centre for Law and Democracy / Access Info Europe’s Global Right to Information Rating (RTI) from 2021. A country’s score is improved by 4 points if they have a Freedom of Information law enacted. Data from Access Now is used to penalize some countries’ base scores. A country’s score is penalized 1 point for each day in the last calendar year (2020) of internet or social media shutdown/throttling, for a total penalty of up to 9 points. For FY23, MCC uses Access Now data from the 2021 #KeepItOn Shutdown Tracker Optimization Project report.

Note regarding construction of missing data: Prior to FY23, MCC utilized old data from Freedom House on Freedom of the Press to construct data for countries that were missing data from RSF. Starting in FY23, MCC will no longer use this methodology as RSF’s methodology has changed and it is no longer comparable to the old Freedom House data. Countries that are missing RSF data will be considered missing and therefore fail this indicator.

Investing in People Category

Immunization Rates Indicator

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

To estimate national immunization coverage, WHO and UNICEF draw on two sources of empirical data: reports of vaccinations performed by service providers (administrative data) and surveys containing items on children’s vaccination history (coverage surveys). Surveys are frequently used in conjunction with administrative data; in some instances—where administrative data differ substantially from survey results—surveys constitute the sole source of information on immunization coverage levels. There are a number of reasons survey data may be used over administrative data; for instance, in some cases, lack of precise information on the size of the target population (the denominator) can make immunization coverage difficult to estimate from administrative data alone. Estimates of the most likely true level of immunization coverage are based on the data available, consideration of potential biases, and contributions of local experts.

In consultation with the WHO, MCC considers countries which have immunization coverage above the median for their scorecard income pool to be passing this indicator. If the median is above 90% for an income pool in a year, countries in that income pool will be considered passing if they have immunization coverage above 90% (even if they score below the median).[[MCC uses the World Bank’s historical ceiling for IDA eligibility to divide countries into two assessment categories. Countries that fall below the ceiling (GNI per capita of $0-$2,045 for FY23) and countries above the ceiling but below the World Bank’s LMIC cut-off (GNI per capita of $2,046-$4,255 in FY23).]]

MCC Methodology

MCC relies on official WHO/United Nations Children’s Fund (UNICEF) estimates for all immunization data. MCC uses the simple average of the 2021 DPT3 coverage rate and the 2021 measles (MCV) coverage rate to calculate FY23 country scores. If a country is missing data for either DPT3 or Measles, it does not receive an index value. The same rule is applied to historical data. As better data become available, WHO/UNICEF make backward revisions to the historical data. In FY23, countries must have immunization rates (as defined above) greater than 90% or the median for their scorecard pool, whichever is lower, to pass this indicator.

Health Expenditures Indicator

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

Prior to FY19, MCC utilized a slightly different indicator, which was discontinued by the WHO. Because MCC started using a different indicator from the WHO in FY19, data from FY19 onward on MCC’s scorecard are not comparable to data found on MCC scorecards prior to FY19.

The FY23 scores come from the 2022 update of the global health expenditure database and largely reflect performance in calendar year 2019.

Primary Education Expenditures Indicator

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

Government outlays on primary education include expenditures on services provided to individual pupils and students and expenditures on services provided on a collective basis. Primary education includes the administration, inspection, operation, or support of schools and other institutions providing primary education at ISCED-97 level 1. It also includes literacy programs for students too old for primary school. For FY23, MCC will use the most recent UNESCO data from 2016 or later.

MCC Methodology

This indicator measures public expenditure on primary education as a percent of GDP. MCC relies on the United Nations Educational, Scientific and Cultural Organization (UNESCO) Institute of Statistics as its source. Specifically, MCC uses the indicator named “Government expenditure on primary education as a percentage of GDP (%).” For FY23, MCC first determines if a country has a value reported by UNESCO in 2016 or later. If so, the most recent data available within those years are used. If a country does not have UNESCO data at any point since 2016, it does not receive an FY23 score.

For UNESCO data, the GDP estimates used in the denominator are provided to UNESCO by the World Bank. As better data become available, UNESCO makes backward revisions to historical data.

Girls’ Primary Education Completion Rate Indicator

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

This indicator was selected since data limitations preclude adjusting the girls’ primary education completion rate for students who drop out during the final year of primary school. Therefore, UNESCO’s estimates should be taken as an upper-bound estimate of the actual female primary completion rate. Because the numerator may include late entrants and over-age children who have repeated one or more grades of primary school but are now graduating, as well as children who entered school early, it is possible for the primary completion rate to exceed 100 percent.

MCC Methodology

MCC draws upon data from UNESCO’s Institute of Statistics as its exclusive source of data for this indicator. Specifically, MCC uses the indicator named “Gross intake ratio to the last grade of primary education, female (%).” To receive an FY23 score, countries must have a UNESCO value in 2016 or later. MCC uses the most recent year available, that is, MCC uses the most recent data from the past six years. If a country does not have UNESCO data at any point from 2016 or later, it does not receive an FY23 score. As better data become available, UNESCO makes backward revisions to its historical data.

Girls’ Secondary Education Enrolment Ratio Indicator

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

MCC draws upon data from UNESCO’s Institute of Statistics as its exclusive source of data. Specifically, MCC uses the indicator named “Gross enrolment ratio, lower secondary, female (%).” To receive an FY23 score, countries must have a UNESCO value on “gross enrolment ratio, lower secondary (female)” from 2016 or later. MCC uses the most recent year available that is, MCC uses the most recent data from the past six years. If a country does not have UNESCO data at any point from 2016 or later, it does not receive an FY23 score. As better data become available, UNESCO makes backward revisions to its historical data.

The Girls’ Secondary Education Enrollment Ratio indicator measures the number of female pupils enrolled in lower secondary school (regardless of age), expressed as a percentage of the total female population of the standard age of enrolment for lower secondary education. Lower secondary school is defined as a program typically designed to complete the development of basic skills and knowledge which began at the primary level. Because the numerator may include late entrants and over-age children, as well as children who entered school early, it is possible for the secondary enrollment rate to exceed 100 percent.

Child Health Indicator

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

• Access to Improved Sanitation: Produced by the World Health Organization (WHO) and the United Nations Children's Fund (UNICEF), this indicator measures the percentage of the population with access to facilities that hygienically separate human excreta from human, animal, and insect contact. Facilities such as sewers or septic tanks, pour-flush latrines and simple pit or ventilated improved pit latrines are assumed to be adequate, provided that they are not public and not shared with other households.
• Access to Improved Water: Produced by WHO and UNICEF, this indicator measures the percentage of the population with access to at least 20 liters of water per person per day from an “improved” source (household connections, public standpipes, boreholes, protected dug wells, protected springs, and rainwater collection) within one kilometer of the user's dwelling and with collection times of no more than 30 minutes.
• Child Mortality (Ages 1-4): Produced by the United Nations Inter-agency Group for Child Mortality Estimation (IGME), this indicator measures the probability of dying between ages 1 and 4.

MCC Methodology

In creating the index used for the FY23 data, Columbia University’s Center for International Earth Science Information Network (CIESIN) and the Yale Center for Environmental Law and Policy (YCELP) relied on the most recent child mortality data ages 1-4 (4q1), water access data, and sanitation access data. If no updates from the most recent year were available, previous data were applied. Each of the three components (child mortality, access to water, and access to sanitation) is equally weighted (33.3%) in the overall index. Country scores are reported as 2019 data on the FY22 MCC Country Scorecards. As better data become available, CIESIN and YCELP make backward revisions to historical data. In FY20, CIESIN changed its source of Child Mortality data from the UN Population Division’s World Population Prospects (WPP data) to the United Nations Inter-agency Group for Child Mortality Estimation (IGME data) since IGME updates its data more frequently than WPP. As such, some variation in Child Health data before FY20 could be attributed to the new underlying data source.

Natural Resource Protection

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

MCC’s Natural Resource Protection Indicator = [(Agriculture Score x Agriculture Weight) + (Fisheries Score x Fisheries Weight) + (Biodiversity and Habitat Score x Biodiversity and Habitat Weight) + (Ecosystem Services Score x Ecosystem Services Weight)] ÷ [Agriculture Weight + Fisheries Weight + Biodiversity and Habitat Weight + Ecosystem Services Weight]

For example, using the old data from the 2020 EPI, the weights for these components would be as follows: Agriculture: 0.05, Fisheries: 0.1, Ecosystem Services: 0.1, and Biodiversity and Habitat: 0.25. This means that a country with all four areas measured, such as Cameroon would have their score calculated as follows. Cameroon had the following component scores: Agriculture: 40.4, Fisheries: 10.5, Ecosystem Services: 31.5, and Biodiversity and Habitat: 48.6. The numerator for this calculation is the weighted sum of the four scores i.e. (40.4 x 0.05) + (10.5 x 0.1) + (31.5 x 0.1) + (48.6 x 0.25) = 18.37. The denominator is just the sum of the weights (0.05 + 0.1 + 0.1 + 0.25) = 0.5. Which means Cameroon would have scored 36.74 (18.37 ÷ 0.5). On the other hand, if Cameroon did not have fishing data for that year, fishing would not be included either in the numerator or the denominator making the score without fisheries data 43.3 (17.32 ÷ 0.4).

Encouraging Economic Freedom Category

Regulatory Quality Indicator

Countries are evaluated on the following factors:

• prevalence of regulations and administrative requirements that impose a burden on business; ease of starting and closing a new business; ease of registering property;
• government intervention in the economy; the extent to which government subsidies keep uncompetitive industries alive;
• labor market policies; employment law provides for flexibility in hiring and firing; wage and price controls;
• the complexity and efficiency of the tax system; pro-investment tax policies;
• trade policy; the height of tariffs barriers; the number of tariff bands; the stability of tariff rates; the extent to which non-tariff barriers are used; the transparency and predictability of the trade regime;
• investment attractiveness; prevalence of bans or investment licensing requirements; financial regulations on foreign investment and capital; legal restrictions on ownership of business and equity by non-residents; foreign currency regulations; general uncertainty about regulation costs; legal regulation of financial institutions; the extent to which exchange rate policy hinders firm competitiveness;
• extensiveness of legal rules and effectiveness of legal regulations in the banking and securities sectors; costs of uncertain rules, laws, or government policies;
• the strength of the banking system; existence of barriers to entry in the banking sector; ease of access to capital markets; protection of domestic banks from foreign competition; whether interest rates are heavily-regulated; transfer costs associated with exporting capital;
• participation of the private sector in infrastructure projects; dominance of state-owned enterprises; openness of public sector contracts to foreign investors; the extent of market competition; effectiveness of competition and anti-trust policies and legislation;
• the existence of a policy, legal, and institutional framework that supports the development of a commercially-based, market-driven rural finance sector that is efficient, equitable, and accessible to low-income populations in rural areas;
• the adoption of an appropriate policy, legal, and regulatory framework to support the emergence and development of an efficient private rural business sector; the establishment of simple, fast and transparent procedures for establishing private agri-businesses;
• the existence of a policy, legal, and institutional framework that supports the development and liberalization of commercially-based agricultural markets (for inputs and produce) that operate in a liberalized and private sector-led, functionally efficient and equitable manner, and that are accessible to small farmers; and
• the extent to which:
  • corporate governance laws encourage ownership and financial disclosure and protect shareholder rights, and are generally enforced;
  • state intervention in the goods and land market is generally limited to regulation and/or legislation to smooth out market imperfections;
  • the customs service is free of corruption, operates transparently, relies on risk management, processes duty collections, and refunds promptly; and
  • trade laws, regulations, and guidelines are published, simplified, and rationalized.

Relationship to Growth and Poverty Reduction

Source

Indicator Institution Methodology

MCC Methodology

For ease of interpretation, MCC has adjusted the median for each of the two scorecard income pools to zero for all of the Worldwide Governance Indicators. Country scores are calculated by taking the difference between actual scores and the median. For example, in FY22 the unadjusted median for the scorecard category of countries with a Gross National Income (GNI) per capita between $1,966 and $4,095 on Control of Corruption was -0.46 (note, in FY23, the GNI per capita range for this scorecard category is $2,046 to $4,255). In order to set the median at zero, MCC simply adds 0.46 to each country’s score (the same thing as subtracting a negative 0.46). Therefore, as an example, Angola’s FY22 Control of Corruption score, which was originally -0.93, was adjusted to -0.47.

The FY23 scores come from the 2022 update of the Worldwide Governance Indicators dataset and largely reflect performance in calendar year 2021. Since the release of the 2006 update of the Worldwide Governance Indicators, the indicators are updated annually. Each year, the World Bank and Brookings Institution also make minor backward revisions to the historical data. Prior to 2006, the World Bank released data every two years (1996, 1998, 2000, 2002 and 2004). With the 2006 release, the World Bank moved to an annual reporting cycle and provided additional historical data for 2003 and 2005.

Land Rights and Access Indicator

Relationship to Growth and Poverty Reduction

Sources

Indicator Institution Methodology

• Access to Land:  Produced by IFAD, this indicator assesses the extent to which the institutional, legal, and market framework provides secure land tenure and equitable access to land in rural areas. It is made up of four subcomponents: (1) the effectiveness of the land tenure system; (2) the effectiveness of land markets; (3) the equitable management of communal lands; and (4) the existence of gender based impediments to access. IFAD’s operational staff base their assessments on a questionnaire and guideposts identifying the basis of each scoring level, available at  https://webapps.ifad.org/members/gc/42/docs/GC-42-L-6.pdf or https://webapps.ifad.org/members/eb/125/docs/EB-2018-125-R-4-Add-1.pdf.  Past datasets can be found in the documents of IFAD’s governing council https://webapps.ifad.org/members/gc.
• Property Rights (v2xcl-prpty): Produced by the Varieties of Democracy Institute (V-Dem), this index measures the rights to acquire,  possess, inherit, and sell private property, including land.  It measures both de jure limits on legal property rights, but also de facto limits that may come in the form of customary law, religious law, common practice, or social norms.  This indicator is assessed separately for men and women, and then averaged together.  V-Dem gathers these data by surveying experts and aggregating their answers into a single index.  More information on V-Dem’s methodology can be found here https://www.v-dem.net/en/our-work/methods/.

MCC Aggregation Methodology

This index draws on 2018 “Access to Land” data from the International Fund for Agricultural Development (IFAD) and 2020 data from V-Dem on Property rights (v2xcl-prpty). Country scores are reported on the Scorecards as 2020 data.  When IFAD data from the current year is missing, normalized data from V-Dem is used.  When V-Dem is missing data, the indicator is considered missing, and a country will receive an N/A for this indicator on the scorecard.

Since each of the two sub-components of this index have different scales, MCC created a common scale for each of the indicators by normalizing them. Please see equations below. Both scales are inverted so that a higher score corresponds to better performance.

MCC Methodology to Normalize IFAD and V-Dem Data:

• Normalized IFAD = 1 – ((Maximum observed value - Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))
• Normalized Property Rights = 1 – ((Maximum observed value - Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))

In FY22 MCC revised its methodology for this indicator to expand the populations and concepts covered and to focus more on broad-based property rights.  As a result, the scores from FY22 are not comparable to scores from FY21 and earlier. For more information about how MCC is making these business climate indicators more inclusive, visit https://www.mcc.gov/blog/entry/blog-101921-financial-inclusion.

Access to Credit Indicator

Relationship to Growth and Poverty Reduction

Sources

Indicator Institution Methodology

• Financial Institution Access (IMF): MCC uses the Financial Institution Access indicator from the IMF’s Financial Development Index.  This indicator has two sub indicators: the number of bank branches per 100,000 adults from the World Bank’s FinStats, and the number of ATMs per 100,000 adults from the IMF’s Financial Access Surveys.
• Share of adults with an account (Findex): From the World Bank’s Findex Database, MCC uses the share of the population (adults 15+) with an account.  This survey counts both formal and informal accounts, including mobile money.

MCC Methodology

This index draws on 2017 data from the Findex database and 2019 data from the IMF. Country scores are reported on the Scorecards as 2019 data. When one indicator is missing data, the other is used. Since each of the two sub-components of this index have different scales, MCC created a common scale for each of the indicators by normalizing them. Please see equations below. Both scales are then inverted so that a higher score corresponds to better performance.

MCC Methodology to Normalize IMF and Findex Data:

• Normalized IMF = 1 – ((Maximum observed value - Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))
• Normalized Findex = 1 – ((Maximum observed value - Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))

In FY22 MCC revised its methodology for this indicator to expand the populations and concepts covered and to focus more on financial inclusion. As a result, the scores from FY22 are not comparable to scores from FY21 and earlier. For more information about how MCC is making these business climate indicators more inclusive, visit https://www.mcc.gov/blog/entry/blog-101921-financial-inclusion.

Employment Opportunity Indicator

Relationship to Growth and Poverty Reduction

Sources and Indicator Institution Methodologies

IV. WORLD Policy Analysis Center Methodology: WORLD regularly reviews the laws and constitutions of countries to determine whether certain rights are protected.

Disability Rights: From WORLD’s disability dataset, MCC uses the following seven questions. These questions are coded as binary, where a legal right provides countries with one point, and anything less gives zero points. These questions are then averaged so that each country is given a sub-score for disability rights between 0 and 1 that represents the share of rights protected.

1. Does the constitution explicitly guarantee equality or non-discrimination for persons with disabilities? (“Guaranteed right” = 1, all else = 0)
2. Does the constitution explicitly require schools or educational institutions to be physically accessible? (“School accessibility explicitly guaranteed” = 1, all else = 0)
3. Does the constitution explicitly guarantee the right to work for adults with disabilities? (“Guaranteed right” or “Work rights generally guaranteed and disability discrimination prohibited” = 1, all else = 0)
4. Does the constitution explicitly guarantee adults with disabilities reasonable accommodation at work? (“Reasonable accommodation explicitly guaranteed” = 1, all else = 0)
5. Does the constitution explicitly require public places and/or public transportation to be physically accessible? (“Accessibility explicitly guaranteed in both public places and public transportation” or “Accessibility guaranteed in one area” = 1, all else = 0)
6. Is disability-based discrimination prohibited through the completion of secondary education? (“Discrimination broadly prohibited) = 1, all else = 0)
7. What is the guaranteed level of inclusion through the completion of secondary education for students with disabilities? (“Integration in mainstream schools and guaranteed support”, “Integration in mainstream schools”, and “Guaranteed, unclear level of integration” = 1, all else = 0)

1. Is there at least some explicit legislative prohibition of workplace discrimination based on disability?
2. Is there at least some explicit legislative prohibition of workplace discrimination based on religion?
3. Is there at least some explicit legislative prohibition of workplace discrimination based on race/ethnicity?
4. Is there at least some explicit legislative prohibition of workplace discrimination based on gender identity?
5. Is there at least some explicit legislative prohibition of workplace discrimination based on political affiliation?
6. Is there at least some explicit legislative prohibition of workplace discrimination based on social class?
7. Is there at least some explicit legislative prohibition of workplace discrimination based on age?
8. Is there at least some explicit legislative prohibition of workplace discrimination based on marital status?
9. Is there at least some explicit legislative prohibition of workplace discrimination based on parenting status?
10. Is there at least some explicit legislative prohibition of workplace discrimination based on migrant status?
11. Is there at least some explicit legislative prohibition of workplace discrimination based on foreign national origin?
12. Is there at least some explicit legislative prohibition of workplace discrimination based on sexual orientation?

V. The Varieties of Democracy Institute’s (V-Dem) data on Civil Society Organization Start-Up and Shutdown, and on the prevalence of forced labor for men and women. Questions regarding the Varieties of Democracy indicator may be directed to contact@v-dem.net.

V-Dem Methodology: V-dem surveys a wide range of experts annually, then aggregates their responses into a single score

Forced Labor: The forced labor sub-indicator (v2xcl_slave) is an average of the prevalence of forced labor and involuntary servitude for men and women. V-Dem defines forced labor as follows: “Involuntary servitude occurs when an adult is unable to quit a job s/he desires to leave — not by reason of economic necessity but rather by reason of employer’s coercion. This includes labor camps but not work or service which forms part of normal civic obligations such as conscription or employment in command economies.”

Civil Society Organizations: The civil society organization start-up and shutdown data are from the V-dem data on CSO Entry and Exit (v2cseeorgs). This sub-indicator measures the extent to which the government achieves control over entry and exit by civil society organizations (CSOs) into public life. CSOs include, but are not limited to, interest groups, labor unions, spiritual organizations if they are engaged in civic or political activities, social movements, professional associations, charities, and other non-governmental organizations.

MCC Methodology

The Employment Opportunity indicator is calculated as an average of four sub-indicators: Disability Rights, Employment Rights, Forced Labor, and CSO Entry and Exit. First, each of these scores are normalized to a scale between 0 and 1, then the four components are averaged together. MCC uses one method to normalize the data for Disability Rights and Employment Rights and a second method to normalize the data for Forced Labor and CSO Entry and Exit. If any components are missing for a particular country the score is the average of the components that are not missing. If all components are missing the indicator is considered missing and a country will receive and N/A on the indicator. Score years are labeled based on the year of the V-Dem data used. For FY23 the scores are labeled as 2021.

The disability rights and employment rights sub-indicators are normalized by averaging the scores on each of the questions (i.e. the percentage of questions where rights are guaranteed in the law). So, if a country has protections for 3 of the 12 groups listed under employment discrimination, they will receive a score of 0.25 on this component. (3÷12 = 0.25; 3 is 25% of 12).

• Average Disability Rights = (Number of questions where there is a guaranteed right)/7
• Average Employment Rights = (Number of questions where there is an employment protection in law)/12

The V-Dem sub-indicators use a different method for normalization:

• Normalized Forced Labor  = 1 – ((Maximum observed value - Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))
• Normalized CSO Entry and Exit  = 1 – ((Maximum observed value - Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))
• For example, to calculate a given country X’s score, MCC first finds the maximum and minimum value for that year across the entire sub-indicator. MCC then subtracts country X’s score from the maximum to get the numerator and subtracts the minimum from the maximum to get the denominator. MCC divides the numerator by the denominator to get the inverted normalized value. Next, MCC subtracts this quotient from 1, to get the normalized value for a country. This process is done for both forced labor and CSO entry and exit.

Trade Policy Indicator

• Trade-weighted average tariff rate;
• Non-tariff barriers (NTBs) including, but not limited to: import licenses; trade quotas; production subsidies; anti-dumping, countervailing, and safeguard measures; government procurement procedures; local content requirements; excessive marking and labeling requirements; export assistance; export taxes and tax concessions; and corruption in the customs service.

Relationship to Growth and Poverty Reduction

Source

Methodology

Trade Policy_i = (Tariff_max-Tariff_i)/(Tariff_max-Tariff_min) - NTB_i

Trade Policy_i represents the trade freedom in country i, Tariff_max and Tariff_min represent the upper and lower bounds (50 and zero percent respectively), and Tariff_i represents the weighted average tariff rate in country i. The result is multiplied by 100 to convert it to a percentage. If applicable to country i, an NTB penalty of 5, 10, 15, or 20 percentage points is then subtracted from the base score, depending on the pervasiveness of NTBs.

In general, the Heritage Foundation uses the most recent data from the World Trade Organization (WTO) on the Most Favored Nation (MFN) trade weighted average duty tariff (weighted by imports from the country’s trading partners) from 2019 or later as the tariff score. In the absence of MFN trade weighted average duty tariff data from 2019 or later in the WTO database, the most recent World Bank data on MFN trade weighted tariff rates is used. In the absence of either of these data sources, a country’s most recent MFN simple average duty tariff from the WTO is used. In cases where there is no recent data form the WTO, but there is a substantial difference between the World Bank's data and the WTO's data, older data from the WTO is used. In the very few cases where data on duties and customs revenues are not available, the authors rely on measures of international trade taxes. Data on tariffs and NTBs are obtained from the following sources: the World Bank’s World Development Indicators and Data on Trade and Import Barriers: Trends in Average Tariff Rates for Developing and Industrial Countries; the World Trade Organization’s Trade Policy Reviews; the Office of the U.S. Trade Representative’s National Trade Estimate Report on Foreign Trade Barriers, the World Bank’s Doing Business report, the U.S. Department of Commerce’s Country Commercial Guide, the Economist Intelligence Unit’s Country Reports, Country Profiles, and Country Commerce data, and “official government publications of each country.”

Inflation Indicator

Relationship to Growth and Poverty Reduction

Source

Methodology

In keeping with economic research findings, MCC considers countries with inflation below 15% to be passing this indicator.

MCC relies exclusively on the IMF’s WEO database for inflation data. WEO inflation data reflect annual percentage change averages for the year, not end-of-period data. FY23 data refer to the 2021 inflation rate. As better data become available, the IMF makes backward revisions to its historical data.

Fiscal Policy Indicator

Relationship to Growth and Poverty Reduction

Source

Methodology

MCC’s Fiscal Policy Score = (2019 + 2020 + 2021) / 3

MCC relies exclusively on the International Monetary Fund’s (IMF) World Economic Outlook (WEO) database for Fiscal Policy data. The fiscal policy indicator measures general government net lending/borrowing as a percent of GDP, averaged over a three year period. Net lending / borrowing is calculated as revenue minus total expenditure. The FY23 score averages the annual data of 2019, 2020 and 2021. As better data become available, the IMF makes backward revisions to its historical data.

The IMF published the net lending/borrowing series for the first time in the 2010 WEO database.

Gender in the Economy Indicator

Relationship to Growth and Poverty Reduction

• Mobility (WBL): These questions explore women’s legal access to physical mobility within a country. Studies show that legally sanctioned gender inequality has a significant negative impact on a country’s economic growth, because it prevents a large portion the population from fully participating in the economy, thus lowering the average ability of the workforce.[[Sarah Iqbal, Asif Islam, Rita Ramalho, Alena Sakhonchik. 2018. Unequal before the law: Measuring legal gender disparities across the world. Women's Studies International Forum 71, pages 29-45. Esteve-Volart, Berta. 2004 Gender Discrimination and Growth: Theory and Evidence from India. London School of Economics and Political Science. Klasen, Stephan. 1999. Does gender inequality reduce growth and development? Evidence from cross-country regressions. Working Paper No. 7, Policy Research Report on Gender and Development. Washington, D.C.: The World Bank. Dollar, David, and Roberta Gatti. 1999. Gender inequality, income, and growth: Are good times good for women? Working Paper No. 1, Policy Research Report on Gender and Development. Washington, D.C.: The World Bank. Morrisson, Christian and Johannes Jütting. 2004. The impacts of social institutions on the economic role of women in developing countries. Working Paper No. 234. Paris: OECD Development Centre. Morrison, Andrew, Dhushyanth Raju, and Nistha Sinha. 2007. Gender equality, poverty, and economic growth. Policy Research Working Paper No. 4349. Washington, D.C.: The World Bank Doepke, Matthias, Michele Tertilt, and Alessandra Voena. 2011. The economics and politics of women’s rights. Working Paper.]]
• Workplace (WBL): These questions explore specific barriers to women’s opportunities in the workplace. Sexual harassment and violence in the workplace can undermine women’s economic empowerment by preventing employment and blocking access to other financial resources.[[World Bank. 2016. Women, Business, and the Law 2016: Getting to Equal. Washington, D.C.: World Bank.]] Research shows that when women have access to employment, investment in children’s health, nutrition, and education often increases, promoting higher levels of human capital.[[Kennedy, E. and P. Peters. 1992. Household food security and child nutrition: the interaction of income and gender of household head. World Development, Vol. 20, Issue 8, August 1992: 1077-1085. Hoddinott, John, and Lawrence Haddad. 1995. “Does Female Income Share Influence Household Expenditures? Evidence From Cote D’Ivoire.” Oxford Bulletin of Economics & Statistics 57 (1): 77 – 96. World Bank. 2001. Engendering Development through Gender Equality in Rights, Resources, and Voice. ISBN 0-19-521596-6. Ranis, Gustav, Frances Stewart and Alejandro Ramirez. 2000. Economic growth and human development. World Development, 28(2): 197-219. Thomas, Duncan. 1990. Intra-household resource allocation: An inferential approach. The Journal of Human Resources, 25(4): 635-664.]]
• Pay (WBL): These questions look at barriers to women’s pay equality. Restrictions on working hours, sectors, and occupations limit the range of jobs that women can hold and this lead to occupational segregation and confinement of women to low-paying sectors and activities.[[World Bank. 2016. Women, Business, and the Law 2016: Getting to Equal. Washington, D.C.: World Bank.]] Many jobs prohibited for women are in highly paid industries, which can have implications for their earning potential. Further, when women are excluded from “male” jobs in the formal sector, an overcrowding can occur in the “female” informal job sector. This leads to a depression of wages for an otherwise productive group of workers.[[Blau, Francine. 1996. Where are We in the Economics of Gender? The Gender Pay Gap. NBER Working Paper 5664. Ali, Khadija. 2000. Structural adjustment policies and women in the labour market: Urban working women in Pakistan. Third World Planning Review, 22(10). Fontana, Marzia and Cristina Paciello. 2007. Labour Regulations and Anti-Discrimination Legislation: How Do They Influence Gender Equality in Employment and Pay? Sussex: Institute of Development Studies.]] Increasing women’s participation in the workforce alone is insufficient for increased economic growth.[[Klasen, S. 2018. The Impact of Gender Inequality on Economic Performance in Developing Countries. Annual Review of Resource Economics. 10, 279-298. Verick, S. 2018. Female labor force participation and development. IZA World of Labor. Mukherjee, P. and Mukhopadhyay, I. 2013. Impact of Gender Inequality on Economic Growth: A Study of Developing Countries. IOSR Journal Of Humanities and Social Science. 13(2) 61-69.]] Women need access to the same job and pay opportunities in order to have an impact on economic growth.[[Verick, S. 2018. Female labor force participation and development. IZA World of Labor. Wodon, Q. and De La Briere, B. 2018. Unrealized Potential: The High Cost of Gender Inequality in Earnings. The World Bank Group. Ferrant, G. and A., Kolev. 2016. Does gender discrimination in social institutions matter for longterm growth?: Cross-country evidence. OECD Development Centre Working Paper n°330.]]
• Marriage (WBL): These questions look at women’s equality in marriage including questions on domestic violence, and child marriage. Research shows the earnings of women in formal wage work who are exposed to severe partner violence are significantly lower than women who do not experience such violence.[[Klugman, J., Hanmer, L., Twigg, S., Hasan, T., McCleary-Sills, J., and Santamaria, J. 2014. Voice and Agency: Empowering Women and Girls for Shared Prosperity. Washington, D.C.: World Bank. World Bank. 2016. Women, Business, and the Law 2016: Getting to Equal. Washington, D.C.: World Bank.]]
• Parenthood (WBL): These questions look at the availability and equality of paid parental leave and the rights of pregnant women.  Childcare and paid parental leave increase workforce participation and pay equality, leading to poverty reduction and increased economic growth.[[Samman, E. and Lombardi, J. 2019. Childcare and Working Families: New Opportunity or Missing Link? UNICEF Evidence Breif. Raub, A., Nandi, A., Earle, A., Chorny, N., Wong, E., Chung, P., Batra, P., Schickedanz, A., Bose, B., Jou, J., Franken, D., and Heyman, J. 2018. Paid Parental Leave: A Detailed Look at Approaches Across OECD Countries.  WORLD Policy Analysis Center UCLA. Sawhill, I., Reeves, R., and Nzau, S. 2019. Paid Leave as Fuel for Economic Growth. Brookings Institute.]]
• Entrepreneurship (WBL): This area explores barriers to women’s ability to start businesses. When one gender receives fewer legal rights, both the country’s potential labor force and potential pool of entrepreneurs decreases. Women’s ability to start businesses and create jobs is essential to increase economic growth and alleviate poverty.[[Brush, C. Cooper, S. 2012. Female Entrepreneurship and Economic Development: An International Perspective. Entrepreneurship & Regional Development. 24(1-2) 1-6. Bahmani-Oskooee M., Galindo MÁ., Méndez M.T. 2012. Women’s Entrepreneurship and Economic Policies. In: Galindo MA., Ribeiro D. (eds) Women’s Entrepreneurship and Economics. International Studies in Entrepreneurship, vol 1000. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-1293-9_3]]
• Assets (WBL): This area analyzes women’s ability to own, control, and inherit property. Owning and having an equal say in their use of property not only increases women’s financial security; it is also associated with their increased bargaining power within the household.[[World Bank. 2016. Women, Business, and the Law 2016: Getting to Equal. Washington, D.C.: World Bank.]]
• Pension (WBL): This area examines questions of whether men and women have the same rights with respect to pensions, retirement, retirement age, and periods of absence from the workforce due to childcare. Pension equality has been shown to reduce poverty, particularly for older women.[[OECD. 2019. Pensions at a Glance – OECD Indicators. Arza, C. 2012. Pension Reforms and Gender Equality in Latin America. United Nations Research Institute for Social Development.2012(2). Zaidi, A. Gasior, K. and Zolyomi, E. 2010. Povery Amongst Older Women and Pensions Policy in the European Union. In Marin, B. and Zolyomi, E. (eds) Women’s Work and Pensions: What is Good, What is Best? Taylor & Francis Group.]]
• Child Marriage and Customary/Religious Law (WORLD Policy Analysis Center): This area deals with women’s constitutional rights, and the status of Child Marriage. Due to the typically large age differences between girls younger than 18 and their husbands, child brides lack bargaining power in the marriage and have less say over their activities and choices, including education and economic activity.[[UNICEF. 2005. Early Marriage: A Harmful Traditional Practice a Statistical Exploration. New York, N.Y.: UNICEF. World Bank. 2016. Women, Business, and the Law 2016: Getting to Equal. Washington, D.C.: World Bank.]] Child marriage--through reduced decision-making power, greater likelihood of school dropout and illiteracy, lower labor force participation and earnings, and less control over productive household assets—severely impedes the economic opportunities of young women.[[Parsons, E., Kes A., Petroni, S., Sexton M., and Wodon Q. 2015. Economic Impacts of Child Marriage: A Review of the Literature. International Bank for Reconstruction and Development: Taylor & Francis. Duflo, E. 2011. Women’s Empowerment and Economic Development. Cambridge: National Bureau of Economic Research. Wodon, Q., Nguyen, M.C., and Tsimpo, C. 2016. Child Marriage, Education, and Agency in Uganda. Feminist Economics 22:1, 54-79]] For many women in rural areas, customary and religious law can override constitutional protections for equality and legal rights.[[UN Women. 2013. Realizing Women’s Rights to Land and Other Productive Resources. United Nations Human Rights Office of the High Commissioner.  Daley, E., Flower, C., Miggiano, L., and Pallas, S. 2013. Women’s Land Rights and Gender Justice in Land Goverance.  International Land Coalition.  Yao, P. 2014 The right to inherit in customary law: an obstacle to women’s emancipation in Ivory Coast.  In Take Back the Land! The Social Function of Land and Housing, Resistance and Alternatives Mathivet, C. (ed.) Habitat International Coalition. Claassens, A. 2009. Who told them we want this Bill? The Traditional Courts Bill and rural women. Agenda: Empowering Women for Gender Equity 82 9-22. Claassens, A. 2005 Womene Customary Law and Discrimination: The Impact of the Communal Land Rights Act. Acta Juridica 42.]] Where these laws can override constitutional protections, all of the other benefits to economic growth and poverty reduction provided by other concepts covered in this indicator are nullified.[[UN Women. 2013. Realizing Women’s Rights to Land and Other Productive Resources. United Nations Human Rights Office of the High Commissioner.  Daley, E., Flower, C., Miggiano, L., and Pallas, S. 2013. Women’s Land Rights and Gender Justice in Land Goverance.  International Land Coalition.  Yao, P. 2014 The right to inherit in customary law: an obstacle to women’s emancipation in Ivory Coast.  In Take Back the Land! The Social Function of Land and Housing, Resistance and Alternatives Mathivet, C. (ed.) Habitat International Coalition. Claassens, A. 2009. Who told them we want this Bill? The Traditional Courts Bill and rural women. Agenda: Empowering Women for Gender Equity 82 9-22. Claassens, A. 2005 Womene Customary Law and Discrimination: The Impact of the Communal Land Rights Act. Acta Juridica 42.]]

Source

Indicator Institution Methodology

The WBL portion of this indicator utilizes the WBL index comprised of 35 questions from the Women, Business, and the Law initiative of the World Bank.  These questions are divided into 8 categories, each of which receives a score based on the percentage of questions with no restrictions on women’s rights (so a country where women have 3 of the 5 rights measured in a category, would score 60 for that category (because 3 is 60% of 5)).  Finally, the scores for all 8 categories are averaged together to create the index.

The WORLD Policy Analysis Center portion of this indicator uses 5 questions from the WORLD Assessment areas on Constitutions and Child Marriage. Specifically:

1. What is the minimum age of marriage for girls? (any age under 18 is considered a restriction)
2. When all exceptions are taken into account, what is the minimum age of marriage for girls? (any age under 18 is considered a restriction)
3. Is there a gender disparity in the minimum legal age of marriage? (any disparity is considered a restriction)
4. What is the constitutional status of customary law? (“Customary law can prevail over some or all of the constitution” and “Customary law is a normative source or legislation cannot contradict customary law,” are considered restrictions).
5. What is the constitutional status of religious law? (“Religious law can prevail over some or all of the constitution” and “Religious law is a normative source or legislation cannot contradict customary law,” are considered restrictions).

MCC Methodology

MCC’s Gender in the Economy Score = [ (WBL Index Score x (8/9)) + (WORLD Childhood Score x (1/9)) ]

For example, if this index had been used in FY21 Afghanistan would have scored 38.125 on the WBL index. On the WORLD questions, Afghanistan has restrictions on all three of the child marriage questions (i.e. child marriage is permitted), but neither of the constitutional/religious law questions.  This means that it lacks restrictions on 40% of this category for a score of 40. To find Afghanistan’s Gender in the Economy score MCC averages the eight WBL categories with the ninth category from WORLD: (38.125 (8/9))+ (40(1/9)) = 38.3.  This gives Afghanistan a final score of 38.3.

In FY22, MCC revised the Gender in the Economy indicator due to changes to WBL’s methodology.  WBL now produces a single aggregate score for every country rather than purely disaggregated data.  This new indicator added issue areas such as pension equality and parental leave equality to the topics covered in MCC’s indicator while dropping two areas previously covered by MCC’s indicator: child marriage and whether customary law can override constitutional legal protections for women. After consulting with a range of experts on gender and development, MCC determined that it is critical to include measurement of these issues in the indicator. As a result, MCC revised the Gender in the Economy indicator in FY 2022 to supplement WBL’s index with WORLD Policy data on child marriage and customary law, as described above. Due to the change in methodology, FY22 scores are not comparable to previous year’s scores.

Notes

Note on Calculating Medians

Open Data