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Building State Capacity: What Is the Impact of Development Projects?

Author

Listed:
  • Vincenzo Di Maro

    (World Bank)

  • David K. Evans

    (Center for Global Development)

  • Stuti Khemani

    (World Bank)

  • Thiago Scot

    (UC Berkeley
    World Bank)

Abstract

Although research has established the importance of state capacity in economic development, less is known about how to build that capacity and the role of external partners in the process. This paper estimates the impact of a typical development project designed to build state capacity in a low-income country. Specifically, it evaluates a multilateral development bank project in Tanzania, which incentivized investments in local state capacity by offering grants conditional on institutional performance scores. The paper uses a difference-in-differences methodology to estimate the project impact, comparing outcomes between 18 project and 22 non-project local governments over 2016–18. Outcomes were measured through two rounds of primary surveys of nearly 500 local government officials and nearly 3,000 households. Over the course of the project, measured state capacity improved in project areas, but due to comparable gains in non-project areas, the project’s value-added to change in state capacity is estimated to be zero across all the dozens of relevant variables in the surveys. The data suggest that state capacity is evolving in Tanzania through endogenous changes in trust and legitimacy in the country rather than from financial incentives offered by external partners.

Suggested Citation

  • Vincenzo Di Maro & David K. Evans & Stuti Khemani & Thiago Scot, 2021. "Building State Capacity: What Is the Impact of Development Projects?," Working Papers 598, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:598
    as

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    References listed on IDEAS

    as
    1. Anderson, Michael L., 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1481-1495.
    2. Daron Acemoglu & Camilo García-Jimeno & James A. Robinson, 2015. "State Capacity and Economic Development: A Network Approach," American Economic Review, American Economic Association, vol. 105(8), pages 2364-2409, August.
    3. Alberto Abadie, 2005. "Semiparametric Difference-in-Differences Estimators," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 1-19.
    4. Jonathan L Weigel, 2020. "The Participation Dividend of Taxation: How Citizens in Congo Engage More with the State When it Tries to Tax Them," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 1849-1903.
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    Cited by:

    1. Daniel Amente KENEA & Dereje Terefe & Bersisa Kecho, 2022. "A Review On Institutional Capacity Challenges Of Land Sector In Ethiopia And The Way Forward," Social Sciences and Education Research Review, Department of Communication, Journalism and Education Sciences, University of Craiova, vol. 9(2), pages 65-75, December.

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    More about this item

    Keywords

    state capacity; governance; decentralizations; performance-based financing;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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