State Capacity and World Bank Project Success

• In Event: States, State Capacity, and Development

Abstract

Previous work has explored whether World Bank loan projects are more likely to succeed where civil liberties are greater, where the “policy environment” is better, and where institutional quality is higher. A serious drawback in this work is that our measures of institutional quality are so poor. Aside from the usual range of measurement validity problems, temporal coverage is lacking. This paper uses a new measure of state capacity produced by a Bayesian latent variable analysis most countries on an annual basis since 1960 to test whether greater state capacity is linked with higher rates of World Bank project success. To measure project success, we use the IEG World Bank Project Performance Dataset, which covers the years 1964-2014 with ratings for 9,600 separate projects. We find that projects are much more likely to receive a satisfactory rating for countries with high state capacity, even after controlling for country wealth, the level of human capital, and the degree of democracy.

Authors

• Jonathan Hanson, University of Michigan

• Rachel Sigman, Naval Postgraduate School