experience, and some show improvements over time only in the non-project LGAs, not in project LGAs. For example, in 2016, only 29 percent of government officials reported paying property taxes on commercial building they own, which rose to 62 percent in 2018, compared to around 75 percent in both years in the project LGAs.

Fourth, despite our checks of pre-project parallel trends in a key measure of local state capacity—own source revenues, since the project LGAs were not selected at random, there remains a possibility that their trends would have been different in the absence of the program, leading to bias in our difference-in-difference estimates. Nevertheless, the following facts make it difficult to defend an argument that the project had impact that we are unable to discern: that the survey data are exceptionally rich, gathering data on many different aspects of local state capacity, from the experience of both government officials and citizens; that we find no evidence at all of significant improvements in the project areas that are different from improvements in the non-project areas; and that the improvements reported over time in both project and non-project areas are consistent with country-wide changes in Tanzania, regardless of the project. For example, the new President re-centralized the collection of local property taxes. The re-centralization of local property taxes directly affected the project design. While at the outset, one of the main indicators of increasing local state capacity was expected to be increases in local own source revenues, the APA entirely dropped the scoring of this component in its 6th round (2017-2018). Yet, we find increases in local government official reports of local tax efforts, and especially so in non-project areas. Local officials’ payment of their own property taxes increases substantially in non-project areas, and they also are more likely than project-area officials to report efforts to improve local tax collection.

To offer ideas and recommendations from research for further innovation in the design of such projects in Tanzania and beyond, we closely reviewed project documents to understand the general design and theory of change on which these capacity building projects are founded. We find that these projects share a common, global template that is being applied across different countries and contexts, centered on the role of an Annual Performance Assessment which is expected to verify whether local governments have certain institutional features that are found in high state capacity countries: such as, existence of planning documents, council meeting minutes, audit reports, procurement tenders and the like.<sup>26</sup> Qualitative research has critiqued this approach to building state capacity as “isomorphic mimicry” (Andrews et al., 2017), whereby developing countries are made to produce documents and establish protocols that resemble institutions in donor countries, but fail to effectively perform the functions of a state. The lack of difference in measured outcomes of state functioning in the data from Tanzania offers quantitative evidence that is consistent with such critiques.

Alternatively, the amounts committed or the scope of the capacity building component might be too small to make a dent.<sup>27</sup> Further, the rationale for using a financial incentive approach is

> 26See examples from Egypt (World Bank, 2018a), Ethiopia (World Bank, 2014b), India (West Bengal) (World Bank, 2016a), Indonesia (World Bank, 2005), Uganda (World Bank, 2016b), and Vietnam (World Bank, 2014a).

> 27For the project in Tanzania, the total donor contribution was US$255 million, but only US$54 million was

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