Across 175 countries, Government effectiveness and Price level rise and fall together at r = +0.71 (on a scale from −1 to +1, where 0 means no link). Comparing only countries with similar income (GDP per person) shrinks it to +0.39, which could easily be chance (q = 0.15, allowing for the many pairs tested, and allowing for countries in the same region being alike). So the first figure mostly shows richer countries differing from poorer ones, not a link between these two things. Caution: direction is not consistent across regions.
Comparing countries across the middle half of price level, 0.343 to 0.68 ratio to the US, government effectiveness is better by 0.873 points at the top of that range than the bottom. Comparing only countries with similar national income, the gap is 0.343 points.
Link before adjusting (r)+0.710p = 4.2e-28 · 175 countries
After adjusting for national income+0.391p = 9.5e-8 · likely range [+0.26, +0.51]
p, allowing for regions0.038standard error 0.148 · 7 regions
Check for luck (q)0.153across 18,622 pairs
How to read these.r runs from −1 (one goes up as the other goes down) to +1 (they rise together), and 0 means no link. Adjusting for national income means comparing countries with the same GDP per person, so differences in wealth can’t explain the link. Income is used in percentage terms, since an extra $1,000 means more to a poor country than to a rich one. p is how likely a link this strong would be if there were really none. Below 0.05 means it is unlikely to be chance. Very small values are written in short form: 1.1e-32 means a decimal point followed by 31 zeros and then 11, so very close to zero. The likely range is where the true figure probably lies, and a range that crosses zero means the link could easily be chance. Countries in the same region tend to resemble each other, so the third figure allows for that, which gives a fairer p. The standard error is the typical size of the error in r. Finally, testing this many pairs means some will look strong by luck alone. A q below 0.05 means this link is unlikely to be one of those.
Government effectiveness · index (approx. -2.5 to 2.5)link with income +0.85 · proxy
Price level · ratio to the US (US = 1)link with income +0.72 · high
Both of these rise and fall closely with national income, so a strong link between them before adjusting was close to certain. Read the adjusted figure, not the first one.
“Link with income” is how closely each measure tracks GDP per person across countries, from −1 to +1.
Every country as a dot
best-fit line line after adjusting
Four ways to measure the link
Method
r
p
Countries
Standard (Pearson), not adjusted
+0.710
4.2e-28
175
By rank (Spearman), not adjusted
+0.698
6.2e-27
175
Standard (Pearson), adjusted for national income
+0.391
9.5e-8
175
By rank (Spearman), adjusted for national income
+0.237
0.002
175
The rank version uses only each country’s place in line, from lowest to highest, so a few extreme countries count for less. The adjusted and unadjusted versions use the same 175 countries: those that report both measures and GDP per person. So the gap between them comes from the adjustment, not from a change in which countries are counted. Drop in the size of r after adjusting: +0.318 (a minus sign means it grew).
How solid is it?
Leaving out one country at a time, r ranges from +0.375 (without BLR) to +0.415 (without HTI). The bar above shows that range on a scale from −1 to +1, with the solid line at the full result. The single country that moves r most: HTI (+0.024).
Fragile: this link may not hold up.
direction is not consistent across regions
Within each region
Countries are not separate, unrelated cases, and neighbors share a lot. A link that holds inside each region is far more believable than one that shows up only when comparing regions.
n
r
East Asia & Pacific
19
+0.68
Europe & Central Asia
48
+0.62
Latin America & Caribbean
33
+0.42
Middle East, North Africa, Afghanistan & Pakistan
20
+0.37
Sub-Saharan Africa
46
-0.17
By income third
If the link shows up only in the richest third of countries, it is a feature of rich countries, not a general pattern.
n
r
Poorest third
59
-0.10
Middle third
58
+0.21
Richest third
58
+0.58
By largest religious group
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
Christians
101
+0.47
Muslims
47
-0.02
By last European coloniser
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
France
25
-0.25
Never a European colony
20
+0.56
Spain
19
+0.30
United Kingdom
55
+0.24
By official ideology
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
Nationalist
25
+0.07
No strong official ideology
111
+0.48
By party system
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
A few parties banned
25
+0.07
No parties banned
117
+0.38
Without outliers (countries far outside the middle half of countries on either measure, by more than one and a half times the width of that middle half): r = +0.408 after dropping 5 countries.
Two series, one country
Both measures over the years for one country you pick. The two charts are stacked so they share only the years along the bottom.
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Over time, within countries
Everything above compares countries with each other at one moment. This section compares each country only with itself over 28years. So a link here can’t come from anything about a country that stays the same, such as its history, geography, institutions or culture.
Within countries over time, there is no link that is clearly more than chance (r = +0.063, comparing each country only with itself over the years, and each year only with the same year elsewhere). Whatever the cross-country picture shows, countries whose government effectiveness moved did not tend to see their price level move with it.
Across countries (adjusted)+0.391for comparison
Within countries+0.057each country vs itself
…and vs the same year elsewhere+0.063q = 0.256 · 179 countries
Year-on-year changes-0.021q = 0.471
Read with care.
Almost all of the second indicator's variation is between countries, so the within-country estimate rests on a small part of the data.
4,387 country-years (one country in one year), 179 countries, 1996–2023, about 25 years each on average. Share of the variation that happens within countries over time: 15% for Government effectiveness, 7% for Price level. The margins of error allow for each country appearing many times, and for each year’s value being close to the year before.
Year-to-year changes are a cautious test, not a final answer. Looking only at changes from one year to the next removes each country’s own trends. But it also makes measurement mistakes louder, which pulls the results toward zero. A near-zero result here is weak evidence of no link, not proof.
With one measure years behind the other
Same year (lag 0): +0.063. A peak away from zero does not show which comes first. These series change slowly — this year’s value is close to last year’s. That makes the curve smooth and nearly symmetric, whatever produced the data. Even a sharp peak at one lag (a gap of some years) would not prove that one measure changes the other.
The largest value on this curve (+0.13 at lag +5) is higher than the same-year one by 0.07. That gap is not a finding. It is the largest of 21 closely related estimates, and picking the biggest of many tests always makes it look bigger. That is exactly why nothing on this site is ranked or chosen by lag.
The data
index (approx. -2.5 to 2.5)
ratio to the US (US = 1)
Years
Singapore SGP
2.09
0.798
2025, 2023
Japan JPN
2.04
0.793
2025, 2023
Luxembourg LUX
1.98
1.07
2025, 2023
Switzerland CHE
1.97
1.32
2025, 2023
Denmark DNK
1.96
1.05
2025, 2023
Finland FIN
1.94
0.968
2025, 2023
New Zealand NZL
1.87
0.957
2025, 2023
Norway NOR
1.84
0.971
2025, 2023
Sweden SWE
1.82
0.874
2025, 2023
Canada CAN
1.76
0.924
2025, 2023
Australia AUS
1.75
1.01
2025, 2023
Netherlands NLD
1.74
0.888
2025, 2023
Ireland IRL
1.63
1.13
2025, 2023
Iceland ISL
1.55
1.22
2025, 2023
Austria AUT
1.54
0.87
2025, 2023
Kaufmann, D. and A. Kraay, Worldwide Governance Indicators, World Bank Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table", American Economic Review, 105(10), 3150-3182, www.ggdc.net/pwt. Data: Penn World Table version 11.0, Groningen Growth and Development Centre, doi:10.34894/FABVLR.
Price level of household consumption, compared with the US (Penn World Table)
Groningen Growth and Development Centre, University of Groningen · via DataverseNL · CC BY 4.0 · updated irregular (new versions every few years)
How expensive the things households buy are in a country, compared with the US in the same year, when money is changed at the market exchange rate. A value of 0.5 means a typical basket of goods and services costs about half what it would in the US. Richer countries tend to be more expensive. It comes from the same price comparisons used to adjust GDP for what money buys, so it shares a building block with GDP per capita (PPP). Years in which the Penn World Table flags the price comparison as unreliable are left out. No "better" direction is set.
How this was computed
Data used: most recent value in 2010-2025; values come from 2015–2025. To adjust for income, each measure is first predicted from GDP per person (in percentage terms, on a log scale) with a straight-line fit. Only what is left over is then compared. This is called a partial correlation. The line is drawn the standard way (ordinary least squares), which picks the line that comes closest to all the countries at once. The error margins allow for countries in the same region resembling each other, using 7 World Bank regions. The q-value corrects for testing all 18,622 pairs at once, using the Benjamini–Hochberg method. Underlying data last updated V-Dem v16; V-Party v2. How the country data works · explore Government effectiveness and Price level
This page shows that two measures go together. It does not show that Government effectiveness changes Price level, or the reverse. These figures also describe countries, not individual people. See the ecological fallacy.
More links with Government effectiveness or Price level