project performance and interprets them in the light of theoretical expectations. Section 8 concludes. The annex contains descriptive statistics and estimation results.

# **2 RELATED LITERATURE**

This paper relates to three strands of research. In terms of substance, it contributes to (i) literature on PSM reform in developing countries and draws on (ii) broader political economy literature. By way of its methodology and empirical basis, it is part of (iii) a small but growing number of econometric studies that employ IEG outcome ratings of World Bank projects as their dependent variable.

The extensive literature on PSM reform in developing countries is dominated by qualitative work on public administration reform trajectories.<sup>1</sup> By contrast, few studies conduct cross-country regression analysis or evaluate the impact<sup>2</sup> of specific PSM reforms. Such analysis has been constrained both by a lack of consensus<sup>3</sup> on how to measure the performance of public administrations and by a lack of comparative data. Over the past decade, international organizations have made significant progress in generating such data: for example, the “Government at a Glance” of the Organisation for Economic Cooperation and Development (OECD, 2013), and the PEFA data,<sup>4</sup> which measure public financial management (PFM) arrangements in relation to an agreed normative framework in over 100 countries. These data sets have enabled pioneering research, such as that of Andrews (2010), who tests whether empirical PFM reform patterns are consistent with isomorphism theory. Despite these advances, comparative data on PSM systems remain patchy in terms of substance and geographic coverage.<sup>5</sup> This paper contributes toward filling the gap in cross-country regression research on PSM reforms by relying on IEG outcome ratings of Bank PSM projects as the dependent variable. IEG ratings are available for a large number of PSM projects and countries, thanks to the World Bank’s role as a leading financier of PSM reforms. Further, they do not imply a universal definition of a “good” PSM reform result. They measure how PSM projects perform _relative_ to their pre-set objectives, not against an

> 1 Examples of comparative qualitative studies include Pollitt and Bouckaert (2004) and Levy and Fukuyama (2010).

> 2 Early examples of impact evaluations of public administration include Bandiera and others (2009) on a natural procurement experiment in Italy, Faguet (2004) on decentralization in Bolivia, as well as Dal Bo and others (2013) and Rasul and Rogger (2013) on civil service management questions.

> 3 Achieving consensus on how to measure the performance of public administrations is challenging for three reasons. First, public bureaucracies serve a range of functions, and there is no single “good” model for the scope and prioritization of these functions. For example, the size and responsibilities of the public sector vary enormously across both the OECD and developing countries. As Isham, Kaufmann, and Pritchett (1995) point out, “deep conceptual differences about what governments ought to do [. . .] imply that efficacy cannot be inferred from the success and failure of achieving measured aggregate outcomes.” Second, changes in broad, less controversial government performance measures—such as child mortality (Andrews, Hay, and Myers, 2010)—are typically hard to attribute to specific reforms and thus of limited use. Third, broad governance measures, such as the World Governance Indicators (WGI), have frequently been criticized for being loaded with (unfounded) assumptions about the institutional forms governments should take (see, for example, Andrews, Hay, and Myers 2010). The World Bank’s own Country Policy and Institutional Assessment (CPIA) ratings (available since 1999) are among the few data sets that reflect some degree of consensus (at least among donors) and include ratings of public administration issues (CPIA scores 12 to 16).

> 4 The OECD’s International Budget Practices and Procedures Database is a second example of such a data set (http://www.oecd.org/gov/budget/database).

> 5 The World Bank is currently launching a multidonor effort to expand the scope of comparative “Indicators of the Strength of Public Sector Management Systems”; <u>http://go.worldbank.org/SGO4LFRSS0.</u>

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