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© 1997 International Bank for Reconstruction and Development / The World Bank

research-article

Civil Liberties, Democracy, and the Performance of Government Projects

Jonathan Isham, Daniel Kaufmann, and Lant H. Pritchett

Jonathan Isham is with the Institutional Reform and the Informal Sector (IRIS) Center at the University of Maryland, Daniel Kaufmann is with the Harvard Institute for International Development (on leave from the World Bank), and Lant H. Pritchett is with the Policy Research Department at the World Bank. The authors thank Deon Filmer and Phil Keefer for helpful comments, as well as seminar participants at Columbia University, the University of Maryland, the Northeast Universities Development Conference, and the World Bank. This article is a reworking of "Governance and the Returns on Investment: An Empirical Investigation" (World Bank Policy Research Department Working Paper 1550).

This article uses a cross-national data set on the performance of government investment projects financed by the World Bank to examine the link between government efficacy and governance. It demonstrates a strong empirical link between civil liberties and the performance of government of projects. Even after controlling for other determinants of performance, countries with the strongest civil liberties have projects with an economic rate of return 8–22 percentage points higher than countries with the weakest civil liberties. The strong effect of civil liberties holds true even when controlling for the level of democracy.

The interrelationship among civil liberties, civil strife, and project performance suggests that the possible mechanism of causation is from more civil liberties to increased citizen voice to better projects. This result adds to the evidence for the view that increasing citizen voice and public accountability—through both participation and better governance—can lead to greater efficacy in government action.


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