IGC Evidence Paper – State

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In a sizable number of developing countries, the public sector fails to provide many, if not most, critical public goods necessary for economic development. The presence of a well-functioning state is key to encouraging economic growth. Part of this concerns having a public sector that has the capacity to raise revenues and spend them effectively; and that policymakers are incentivized to act in favour of their citizen. This paper discusses recent developments in the literature on state effectiveness. Each section covers the relevant theory with a special focus on the current knowledge about the mechanisms highlighted, potential policy measures, gaps in current research and potential ways to fill these gaps.