Organizational Capacity

Organizational capacity is critical to the effective implementation of policy. Consequently, strategic legislators and bureaucrats must take capacity into account in designing programs. This article develops a theory of endogenous organizational capacity. Capacity is modeled as an investment that affects a policy's subsequent quality or implementation level. The agency has an advantage in providing capacity investments and may therefore constrain the legislature's policy choices. A key variable is whether investments can be "targeted" toward specific policies. If it cannot, then implementation levels decrease with the divergence in the players' ideal points and policy-making authority may be delegated to encourage investment. If investment can be targeted, then implementation levels increase with the divergence of ideal points if the agency is sufficiently professionalized, and no delegation occurs. In this case, the agency captures more benefits from its investment, and capacity is higher. The agency therefore prefers policy-specific technology. (JEL D72, D73)