Individuals and Organizations as Sources of State Effectiveness

American Economic Review. 2023. Vol. 113. No. 8. P. 2121–2167.

Best M., Hjort J., Szakonyi D. S.

Bureaucrats implement policy. How important are they for a state’s productivity? And do the tradeoffs between policies depend on their effectiveness? Using data on 16 million public purchases in Russia, we show that 39 percent of the variation in prices paid for narrowly defined items is due to the individual bureaucrats and organizations who manage procurement. Low-price buyers also display higher spending quality. Theory suggests that such differences in effectiveness can be pivotal for policy design. To illustrate, we show that a common one—bid preferences for domestic suppliers—substantially improves procurement performance, but only when implemented by ineffective bureaucrats.

Keywords: economic development, organizations, state effectiveness

Publication based on the results of: Institutions and human capital as factors in crisis adaptation (2024)