04
The CDR Index — Measurement and Data
How abstract institutional qualities are standardized into a globally comparable composite index
Learning Objectives
- Apply the standardization formulas to convert raw country data into the [0,1] CDR variables
- Identify the data sources for each variable and understand their limitations (e.g., C excludes privately traded capital)
- Interpret the CDR index = CDRs (sum) + CDRp (product) decomposition
Variable Standardization Formulas
- g = (G − Gmin) / (Gmax − Gmin)
- C = (Cappc − Capmin) / (Capmax − Capmin)
- D = (Drank,low − Drank) / (Drank,low − Drank,high)
- R = (Corrrank,low − Corrrank) / (Corrrank,low − Corrrank,high)
- N = (NRpc − NRmin) / (NRmax − NRmin)
Data Sources
- GDPppp: IMF (constant international $2014)
- Capitalism: Index Mundi / total market capitalization (US$)
- Democracy: Democracy Ranking (rank-ordered, 1 = most democratic)
- Rule of Law: Transparency International Corruption Perceptions Index (inverted)
- Natural Resources: World Bank — total resource rents per capita
- Latitude: La Porta et al. (1999) — instrumental variable for 2SLS
CDR Index Decomposition
CDR index = CDRs + CDRp
CDRs (sum index) = 1.53·C + 0.14·D + 0.23·R
CDRp (product index) = −1.21·C·D·R
The negative CDRp term represents democratic friction — decision-making disagreement that reduces G from its theoretical maximum. All variables standardized to [0,1]. Data: 79 countries, year 2014 baseline; re-estimated 1995–2016 with identical results (global time invariance).
| Country | GDPppp ($) | C | D | R | CDR index | N |
|---|
Click any column header to sort. This is the 8-country example table reproduced from the outline (P1 Tables 1–2 / P3 Table 1 contain the full 79-country panel).