Institutions and Prosperity : Public Institutions for Enabling the Private Sector

Overview & Synopsis

The private sector is the main driver of economic growth and development, but it needs a functioning public sector to thrive. Governments around the world invest heavily in public goods that are essential for private sector growth, from roads, bridges, and ports to regulatory frameworks. Yet institutional challenges such as waste, corruption, insufficient expertise, and uneven enforcement often weaken the link between spending and results. Consequently, policies and projects can frequently prove less effective than hoped for by citizens, firms, and policy makers themselves. Institutions and Prosperity: Public Institutions for Enabling the Private Sector focuses on why policy implementation fails and how it can be improved. It focuses on two areas that sit at the heart of market competition: public procurement and regulation. This report advances current knowledge on governance and institutions by focusing on specific public institutions rather than on entire countries or governments. Because governments may implement policies effectively in some areas but not others, the report concentrates on the individual ministries, departments, and agencies responsible for implementation. The report also develops a conceptual framework that can be used to identify institutional constraints to effective policy implementation. The framework unpacks institutional capacity along four organizational dimensions and three cross-cutting governance dimensions. This report applies the framework to public institutions mandated to foster private sector development, focusing on procurement and regulatory institutions. It highlights the challenges and trade-offs these institutions must navigate to enable the private sector effectively while minimizing favoritism and corruption. More broadly, the report demonstrates how the framework can help diagnose the specific and interconnected constraints that frequently prevent public institutions from implementing their mandates effectively.