Furthermore, as Kaufman et al. (2008:3) argue in a summary of this debate on quality of government indicators, “perceptions matter because agents base their actions on their perceptions, impression, and views.” If citizens or foreign firms perceive a given
country’s administration to be plagued with corruption and public sector mismanagement, they are less likely to use its public services, with deleterious consequences for the country. An additional reason to use perception-based indicators of corruption or quality of government is that they tend to go closely “hand in hand” (Holmberg, Rothstein and Nasiritousi 2008). For example, three of the most widely used indexes of quality of government – the World Bank’s “Government Effectiveness Index”, Transparency International’s “Corruption Perceptions Index” and the “Rule of Law Index” also from the World Bank – correlate at the 0.90 level.