Measurement and evolution of state capacity: an exploration of a lesser known aspect of governance

This paper offers an overview of the virtues and limitations in current empirical research on the role of state effectiveness in economic development. Existing measures on governance quality used in cross-national research can be usefully exploited to capture aspects of state capacity. We utilise them to present some stylised facts on its evolution. Post Cold War, most developing economies have experienced improvements in state capacity, but the gap with advanced economies is still wide. We also test for convergence in state capacity, finding evidence of (slow) convergence both when observing the decline in cross-sectional variation of measures of legal and administrative capacity and when running convergence regressions. One factor limiting current research is short temporal coverage. Future research should 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.