Institutional Capacity and Local Economic Development in Decentralized Local Authorities: An Empirical Analysis of Cameroon

Abstract

This study examines the association between institutional capacity building (ICB) and local economic development (LED) among decentralised local authorities in Cameroon. It draws on the 2021 Capitalisation Survey of Achievements of the National Participatory Development Programme (ECA-PNDP), which covers 144 municipalities. Multidimensional indices of institutional capacity and local economic development are constructed from survey indicators using principal component analysis and equal-weight aggregation. Institutional capacity encompasses participatory governance, local planning, rationalisation of public investment, financial capacity and human capital. Local economic development is represented by economic infrastructure, employment, income and territorial attractiveness. The empirical analysis uses ordinary least squares regression, alternative index measures and quantile regression. The reported main regression includes 139 observations. Its fully adjusted specification indicates a positive association between institutional capacity and the survey-based LED index, with an estimated ICB coefficient of 0.0611 that is statistically significant at the 5% level. Alternative measures also yield positive associations, while quantile regression results vary across specifications. These findings suggest that administrative and financial management capacities warrant attention in efforts to strengthen local governance and development planning. However, the cross-sectional design and survey-derived measures preclude causal inference and do not capture every dimension of local economic development. The study contributes municipality-level evidence concerning decentralisation and institutional capacity in Cameroon.