Weak state capacity can reduce policy options

In 2012, Hanushek et al. published a paper titled 'Does school autonomy make sense everywhere?' The authors suggest 'autonomy may be conducive to student achievement in well-developed systems but detrimental in low-performing systems.' This result is important but the approach is more so. Usually, impact of a policy in a particular context is evaluated but the authors do something different. They "introduce the simple idea that the productivity of any input is directly related to the institutional structure of country that determines the basic environment and rules of schools, how decisions are made, the overall incentives in the system, and so forth." 

In summary, the analysis also considers the interaction between policy and the environment in which it is being implemented. This is a simple yet powerful idea. This is of high relevance in the debates on skill training, school choice and PPPs in education.

World Bank recently released  a report named 'Skills and Jobs - Lessons Learned and Options for Collaboration'. This has good summary of experience of skill training programmes from across the world and the experience. Not surprisingly, the skilling programmes differ widely in design across countries.
  1. Germany uses apprenticeship model where the firms (or individuals) are subsidized for training apprentices. The structure of the program, quality, content and other aspects are regulated by a central agency.
  2. In South Korea, SMEs weren't taking advantage of the funds earmarked for training due to lack of capacity. So, the government encouraged them to form consortium so that they could collaborate in providing training. Later, this expanded to include large firms and SMEs could learn from them.
  3. Singapore's Economic Development Board (EDB) invited Tata group to set up a training center. Government sponsored lands, buildings, 70% of the operating costs and paid the stipends for all trainees. Tata trained twice the number of staff that they need. At the end of training period, Tata recruited some people from this group and the rest were used as an asset to attract other engineering firms to Singapore.
It is important to note that the report says, "the strongest constraint in the transferability of such programs is that they require a strong institutional framework, in particular a clear legal framework."

There are two important lessons from this exercise.

One, weak state capacity reduces the policy options. The fact that capacity of a nation to enforce legal contracts and other aspects is weak automatically rules out the possibility of incorporating good ideas from other contexts. Choice to governments is as important as the choice to an individual. Lack of choices resulting from weak capacity is detrimental to already ailing systems.

Two, capacity to enforce regulations should also be considered as a factor while making policy choices apart from the usual metrics of context, cost effectiveness, political economy etc. Not all regulations are enforceable by everyone. The capacity to enforce depends on the strengths of the government, context, time and some times the amount of focus needed. Focusing on a particular policy to ensure its smooth execution also comes with its own opportunity costs, in cases of states with weak state capacity. All of these should be factored in while making policy choices.

For example, Rajasthan government is planning to draft a PPP policy for primary education. Some people have questioned 'If the state cannot oversee the functioning of its own schools now, what oversight will it provide for privately-run schools?'. Government failing to oversee public schools doesn't mean that it can't regulate private schools. The appropriate question to ask is, which policy can the government enforce better?

One must also note that the capacity to execute a policy should be used while prioritizing from among multiple policy options but not to filter the policy options. For example, if capacity to execute was to be used as a filter, then the Aadhar policy wouldn't have come into light. In such scenarios, if it is decided that it is necessary to implement the policy then putting extra efforts to ensure its proper execution is the only way out.

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