How does delegation affect the administrative capacity of the hollow state?

<ns5:p>A hollow state results from extensive delegation via contracting out and decentralization. How does this affect its administrative capacity to steer contractors toward collective goals such as environmental sustainability? This study argues that delegation stymies state-level administrative capacity by diminishing ‘demand power’, i.e., the state’s uniform and comprehensive power to formulate public demand. Contracting out fragments demand based on transaction characteristics, while decentralization fragments demand by buyer organization. This is tested by analyzing how transaction characteristics and political control over buyer organizations affect contracting for sustainability. Using data on all 566,442 public procurement procedures in Germany from 2021-2023, a logistic generalized linear mixed model finds that the specificity of assets needed to produce a good, service or work is the single strongest barrier to including sustainability criteria in a contract. While buyers with more political oversight are more likely to contract for sustainability, this effect is secondary. This is the first study to assess an entire hollow state, finding that demand fragmentation by product type is a more critical impediment to demand power than buyer fragmentation.</ns5:p>