Finance and Development, v35, n1 (March 1998): 26-29;
World Bank Economic Review, v11, n2 (May 1997): 219-42.
We use a cross-national data set on the performance of government investment projects financed by the World Bank to examine the link between government efficacy and governance. We demonstrate a strong empirical link between civil liberties and government project performance. Even after controlling for other performance determinants, countries with the best civil liberties have projects with an economic rate of return (ERR) between 8 and 22 percentage points higher than countries with the worst civil liberties (the average ERR is 16 percent). The strong effect of civil liberties holds true even controlling for a country's level of "democracy." This provides empirical evidence that liberties provide a mechanism for greater citizen voice in establishing a level of accountability which induces better government performance.