An efficient public administration is a key prerequisite for a government to achieve its policy goals, as the public administration puts the laws, rules and regulations into practice. Administrative capacity requires not only knowledge about the laws, rules and regulations, but also knowledge about effective administrative processes and successful organizational practices. This in one reason why the capacity of the public administration varies widely, not only across countries, but also within countries. This begs the question of whether and how it is possible to transfer the knowledge from high-capacity administrations to low-capacity administrations.

In our research, we investigate whether seconding officials from high-performing administrations to lower-performing administrations is an effective means to increase short-term and long-term administrative capacity. We study the capacity building measures in the fiscal administration in East Germany after the fall of the Berlin wall. Each of the newly established East German tax offices was assigned to one or more West German partner tax offices which were responsible for capacity building. As their main measure, the West German tax offices sent officials on secondments to the East German tax offices. The heterogeneous situation of the West German partner tax offices, which is exogenous to the East German tax offices, partly determined the amount and composition of the secondments. This allows us to make causal inferences about the effectiveness of secondments as capacity building instrument.

We hand collected a unique data set at the level of the East German tax office for the period 1989-2010. Our data contains detailed information on the secondments. There is substantial heterogeneity of secondments, both with respect to the overall amount and their composition in terms of the hierarchical level of seconded officials and the lengths of their stay. We also collected data on different measures of tax office performance including tax revenues, duration of tax assessments and revocation of tax statements. The data also includes information on alternative capacity building measures such as training of East German officials and new hires.