Most would agree that state institutional capacity is the ability of the state to provide goods and services that the state is responsible for, although many would disagree on what exactly those responsibilities are. According to a narrow definition, the state’s institutional capacity is the ability of the government to enforce laws and regulations. Many subjective indices based on expert estimates (such as control over corruption, rule of law, and government effectiveness) are designed to measure institutional capacity. Many researchers consider them biased, however, and do not think they help to explain economic performance.
For instance, data from different sources frequently show diverging trends. From 2000 to 2005, according to the World Bank (WB) Control of Corruption index (Figure 1), corruption was falling in Russia and increasing in China, whereas the Transparency International Corruption Perception Index (Figure 2) suggests that corruption in Russia increased over this time and did not change much in China. Also, according to the World Bank, in 2005 Russia and China were at par, whereas Transparency International indicates that China was two times less corrupt than Russia. [...]