Antonio Savoia

MEASUREMENT, EVOLUTION, DETERMINANTS, AND CONSEQUENCES OF STATE CAPACITY: A REVIEW OF RECENT RESEARCH

There is increasing realization that state capacity is a fundamental ingredient for effective governance, and is a crucial element of long-run economic development. This paper offers an overview of the strengths and limitations in current empirical research on the measurement of state capacity. The paper also surveys the fast emerging literature on the determinants and effects of state capacity. We argue that existing measures on governance quality used in cross-national research can be usefully exploited to capture different aspects of state capacity, and show that post the end of the Cold War, developing economies have experienced improvements in legal, administrative and bureaucratic capacity, but the gap with advanced economies is still wide. Future research should address the short temporal coverage of available measures of state capacity, as well as providing a systematic quantitative assessment of the determinants of capacity and of its effects on development outcomes, such as health and education, which have not received sufficient scrutiny.

Measurement and Evolution of State Capacity: Exploring a Lesser Known Aspect of Governance

This paper offers an overview of the strengths and limitations in current empirical research on the measurement of state capacity. The paper also surveys the fast emerging literature on the determinants and effects of state capacity. We argue that existing measures on governance quality used in cross-national research can be usefully exploited to capture different aspects of state capacity. We utilise them to provide stylised facts on its evolution, and that post the end of the Cold War in the early 1990s, developing economies have experienced improvements in legal, administrative and bureaucratic capacity, but the gap with advanced economies is still wide. We note that empirical analysis is constrained by the short temporal coverage of available measures. Future research should also address this, as well as providing a systematic econometric assessment of the determinants of capacity and of its effects on development outcomes, such as health and education, which have not received sufficient scrutiny.

Do We See Convergence in Institutions? A Cross-Country Analysis

Differences in the quality of institutions may explain differences in per capita income. Yet, we know relatively little on how institutions evolve. This paper contributes to such knowledge by testing for convergence in legal, bureaucratic and administrative institutional quality. Using cross-section and panel methods on a large sample of countries from the 1970s to 2010, we find that countries with initially poor institutions tended to slowly catch up, both when they shared the same initial conditions and when they did not. However, the convergence process seems to be a temporary effect following the end of the Cold War.

Institutions: Evolution, Path Dependency, Anachronisms and Impact

Abstract This Special Section builds on cutting edge developments in the literature on institutional change and its link to economic development. It throws fresh light on this link from both a microeconomic (firm and household level) and a macroeconomic (country and cross country level) perspective. The main message is that understanding the dynamics of institutional change is key to understanding the process of economic development, while understanding evolving institutions and their links to economic development requires an understanding of the state of flux and the heterogeneous characteristics of individual settings.

How Do Political Institutions Affect Fiscal Capacity? Explaining Taxation in Developing Economies

A central aspect of institutional development in less developed economies is building tax systems capable of raising revenues from broad tax bases, i.e., fiscal capacity. While it is recognised in the literature that fiscal capacity is pivotal for state building and economic development, it is less clear what its origins are and what explains its cross-country differences. We focus on political institutions, seen as stronger systems of checks and balances on the executive. Exploiting a recent database on public sector performance in developing economies and an IV strategy, we identify their long-run impact and we ‘unpack’ the concept of fiscal capacity, distinguishing between the accountability and transparency of fiscal institutions (impartiality) and their effectiveness in extracting revenues. We find that stronger constraints on the executive foster the impartiality of tax systems. However, there is no robust evidence that they also improve its effectiveness. The impact of political institutions on the impartiality dimension works through the rule of law and the performance of the bureaucracy.

Do We See Convergence in Institutional Quality? A Cross-Country Analysis

Abstract Differences in the quality of institutions may explain differences in per capita income. Yet, we know relatively little on how institutions evolve. This paper contributes to such knowledge by testing for convergence in legal, bureaucratic and administrative institutional quality. Using cross-section and panel methods on a large sample of countries from the 1970s to 2010, we find that countries with initially poor institutions tended to slowly catch up, both when they shared the same initial conditions and when they did not. However, the convergence process seems to be a temporary effect following the end of the Cold War.