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This article uses 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. It demonstrates a strong empirical link between civil liberties and the performance of government of projects. Even after controlling for other determinants of performance, countries with the strongest civil liberties have projects with an economic rate of return 8–22 percentage points higher than countries with the weakest civil liberties. The strong effect of civil liberties holds true even when controlling for the level of democracy.

The interrelationship among civil liberties, civil strife, and project performance suggests that the possible mechanism of causation is from more civil liberties to increased citizen voice to better projects. This result adds to the evidence for the view that increasing citizen voice and public …