A Proper Measurement of the Countries’ Governance Climate with an Overall Composite Index

This article validates a composite governance indicator for MEDA countries by comparing it with alternative methods for reconstructing indices. Building on the World Bank’s Worldwide Governance Indicators (WGIs), we benchmark our overall index against those obtained through principal component analysis (PCA), as well as the Mazziotta–Pareto Index (MPI) and the weighted MPI (WMPI). Covering 2010–2023—a period marked by two important shocks, the “Arab Springs” and the global pandemic, the analysis shows that PCA closely mirrors governance conditions, while MPI and WMPI are less effective. On the other hand, our composite index is SMART—Specific, Measurable, Achievable, Reliable, and Time-bound. It is easy to calculate and implement, theoretically correct, preserves cross-country governance trends, captures all three governance sub-dimensions, and adequately incorporates the six basic indicators. JEL Classification C18, C43, O10, P47