Organizational Capacity and Project Dynamics

This paper provides a dynamic theory of the effects of organizational capacity on public policy. Consistent with prevailing accounts, a bureaucratic organization with higher capacity, i.e., a better ability to get things done, is more likely to deliver projects in a timely, predictable, or efficient fashion. However, capacity also interacts with po- litical institutions to produce far-reaching implications for the size and distribution of public projects. Capacity-induced delays and institutional porousness can allow future political opponents to revise projects in their favor. In response, politicians design projects to avoid revisions, for example by equalizing distributive benefits, or by over- scaling projects. We show that higher organizational capacity can increase project size, inequalities in the distribution of project benefits, and delays. The range of capacity levels that produce low social benefits increases with the extent of institutional con- straints. This suggests that political systems with high capacity and high institutional constraints are especially vulnerable to inefficient projects.