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

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  • Di Maro,Vincenzo
  • Evans,David K.
  • Khemani,Stuti
  • De Gouvea Scot De Arruda,Thiago

Abstract

Although research has established the importance of state capacity in economic development, lessis known about how state capacity comes about and the role of external partners in the process. This paper estimatesthe impact of an external project designed to build state capacity in a low-income country. Specifically, it evaluatesa multilateral development bank project in Tanzania, designed to incentivize investments in local state capacityby offering grants conditional on institutional performance scores. This program typifies many development projects tobuild state capacity implemented around the world by development agencies. The paper uses adifference-in-differences methodology to estimate the project impact, comparing outcomes between 18 project and 22non-project local governments over 2016–18. Outcomes were measured through two rounds of primary surveys of nearly 500local government officials and nearly 3,000 households. Over the course of the project, measured state capacity improvedin project areas, but due to comparable gains in non-project areas, the project’s value-added to change in state capacityis estimated to be zero across all the dozens of relevant variables in the surveys. The data suggest that improvementsin state capacity in Tanzania resulted from endogenous changes in trust and legitimacy in the country rather thanfrom financial incentives offered by external partners.

Suggested Citation

  • Di Maro,Vincenzo & Evans,David K. & Khemani,Stuti & De Gouvea Scot De Arruda,Thiago, 2021. "Building State Capacity : What Is the Impact of Development Projects ?," Policy Research Working Paper Series 9875, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9875
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    References listed on IDEAS

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    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," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt15n8j26f, Department of Agricultural & Resource Economics, UC Berkeley.
    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. 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.
    4. Alberto Abadie, 2005. "Semiparametric Difference-in-Differences Estimators," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 1-19.
    5. 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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    More about this item

    Keywords

    Regional Urban Development; National Urban Development Policies & Strategies; Urban Communities; Urban Economic Development; Urban Economics; City to City Alliances; Judicial System Reform; Legal Reform; Regulatory Regimes; Legislation; Common Property Resource Development; Social Policy; Legal Products; Public Sector Administrative and Civil Service Reform; De Facto Governments; Democratic Government; Public Sector Administrative & Civil Service Reform; Organizational Management; Public Finance Decentralization and Poverty Reduction; Macro-Fiscal Policy; Taxation & Subsidies; Economic Adjustment and Lending; Public Sector Economics;
    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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