Political economy analysis (PEA) aims to situate development interventions within an understanding of the prevailing political and economic processes in society – specifically, the incentives, relationships, and distribution and contestation of power among different groups and individuals. Such an analysis can support more politically feasible and therefore more effective development strategies by setting realistic expectations of what can be achieved, over what timescale, and the risks involved.
Several agencies now incorporate political economy analysis or training into their programming. PEA complements conventional governance assessments by providing a deeper level of understanding about power, state capability, accountability and responsiveness. It has also proven useful to understand processes of state-building and state collapse in fragile or conflict-affected states.
Political economy analysis has enjoyed a recent resurgence in development thinking. However, its ultimate impact will depend on the extent to which it changes development practice. It is widely acknowledged that creating the right institutional incentives for donor agency staff to think and work politically is challenging. Nevertheless, the emergence of a new generation of operationally relevant tools at the sector and programme level offers good possibilities for making PEA actionable. While there is a recognised need for more evidence, isolated case studies are starting to emerge that can demonstrate a link between politically informed programming and better development outcomes.