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Abstract. There is increasing realization that state capacity is a fundamental ingredient for effective governance, and is a crucial element of long-run economic development. This paper offers an overview of the strengths and limitations in current empirical research on the measurement of state capacity. The paper also surveys the fast emerging literature on the determinants and effects of state capacity. We argue that existing measures on governance quality used in cross-national research can be usefully exploited to capture different aspects of state capacity, and show that post the end of the Cold War, developing economies have experienced improvements in legal, administrative and bureaucratic capacity, but the gap with advanced economies is still wide. Future research should address the short temporal coverage of available measures of state capacity, as well as providing a systematic quantitative assessment of the determinants of capacity and of its effects on development outcomes, such as health and education, which have not received sufficient scrutiny.

Is Bangladesh's development progress surprising, given its level of economic development? Using aggregate indices of education, health, demographic and gender equality outcomes, we empirically investigate the hypothesis that Bangladesh made exceptional gains in human development compared with countries with similar level of per capita income. Stylised facts and cross-country regression results indicate that, for a broad range of dimensions, there is a human development surplus. Further tests show that such surplus does not reflect the role of economic growth and public expenditure programmes. We conclude by speculating on the role of Bangladesh's human development to sustain the process of growth and on the implications of governance and institutional quality for the nexus between growth and human development.

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