Capacity Substitution: When External Support Undermines Domestic State Building

DiGiuseppe & Shea (2021) show how US support can foster property rights and build extractive capacity. But I wonder if there's a darker side - what if external support creates dependency and crowds out domestic revenue generation efforts? This study would examine when and why external support leads to "capacity substitution" rather than capacity building. The research could develop a theoretical framework identifying conditions (regime type, support duration, accountability mechanisms) that determine whether external support complements or substitutes for domestic capacity building. It would test this using cases like Pakistan (Ijaz 2025) and other US-supported states, examining whether periods of high external support correlate with lower domestic revenue effort. This would challenge the optimistic view of external support as always capacity-enhancing, with important policy implications for international assistance.

References:

1. US Patronage, State Capacity, and Civil Conflict. M. DiGiuseppe, Patrick E. Shea (2021). Journal of Politics.
2. Moral Hazard or State Capacity? U.S. Military Assistance and Political Violence in Pakistan. ShahBano Ijaz (2025). Journal of Conflict Resolution.