in: Applied Economics Letters (forthcoming)
Effective capacity building is vital for developing countries to enable them to contribute to global efforts to mitigate climate change and adapt to its consequences. This letter provides first empirical evidence on the impact of climate finance on institutional capacity in recipient countries. Using data from the Global Environment Facility (GEF) and a World Bank index, we find a robust positive relation for sub-Saharan Africa from dynamic panel data estimation whereas no such effect is detected across remaining sample countries. While focusing on identification, however, our analysis should be seen as an initial piece of the puzzle. In light of the abundance of different capacity building concepts and definitions in the field of climate change future research is needed to understand the underlying mechanics.