Institutions determine economic performance, and institutions are governed by the state. How can they enhance a country’s prospects for sustained market-led growth? This World Bank study argues that the institutional capability of the state has taken on greater significance with far-reaching implications for development policy and public sector reform.
If institutions are the rules of the game that govern production and exchange, the state plays a major role in establishing these rules. Furthermore, it has the monopoly power on legitimate use of coercion to enforce them. This report provides an institutional framework for service delivery. This is an essential component of state capability. Furthermore, it applies this framework to an evaluation of World Bank support for service delivery in the health, nutrition, and population sectors.
There are two core ideas to an institutional framework for service delivery. Firstly, institutional arrangements governing the design, delivery and regulation of a service should be based on its inherent goods characteristics. The three key variables that comprise goods characteristics are (1) measurability (2) information asymmetry (3) contestability. Secondly, a government’s ability to increase the efficiency and effectiveness of service delivery is a function of the match between positive institutional options which are derived from goods characteristics and country characteristics. Typically, country characteristics are comprised of political, state and social institutions, which shape a country’s readiness to reform. Achieving a positive match between goods and country characteristics is an enduring challenge for World Bank specialists and country teams. The research made the following key findings in this respect:
- There needs to be greater institutional pluralism in the ways the World Bank does business in infrastructure, rural, and social sectors.
- However, efficient service delivery should not be made an issue of the state versus market.
- In the health, nutrition and population sector, the Bank should unbundle and categorize essential health and clinical services according to goods characteristics.
- The Bank and its clients face the challenge of fitting theories of better practice delivery options to the reality of institutions in particular countries.
- The Bank has a poor track record of building country knowledge of institutional endowments that affect service delivery.
- Country knowledge should be integrated into operations through assessments of state, political, and social institutions.
The study suggests that the Bank has made progress toward a ‘goods characteristics’ approach. The greatest advances have been made in infrastructure and some rural services. However, it has been less successful in the social sectors, where support remains largely technocratic. The report ends with an analysis of policy transformation in recent years. Cross-sector comparisons reveal four generations of support for service delivery:
- First-generation support focused mainly on physical implementation of projects.
- Second-generation interventions, which characterised most social service interventions, focused on improving the financial and organizational viability of implementing agencies through technical assistance.
- Third-generation support was marked by significant unbundling of service delivery activities and clearer links to goods characteristics.
- Fourth-generation interventions are works-in-progress and represent efforts to develop new governance arrangements that systematically combine competition, voice and hierarchy in the design, delivery and monitoring of Bank projects.
