When Autonomy Works: Capacity and Performance in Subnational Public Organizations in Colombia

Autonomy is often tied to public-sector performance, yet when and through which dimensions autonomy improves performance remains unclear. Using Colombian panel data (2018–2024), we study how autonomy shapes performance across municipalities and State Industrial and Commercial Enterprises (SICEs). We proxy municipal managerial autonomy with an organizational index and SICE autonomy with fiscal and spending-flexibility measures. Two-way fixed-effects models relate autonomy to the Institutional Performance Index (IPI) and the Fiscal Performance Index (FPI), allowing heterogeneity by municipality capacity tier. In municipalities, the autonomy–IPI relationship is nonlinear: gains occur below a threshold in low-capacity municipalities and above a threshold in high-capacity ones. These patterns are consistent with differences in managerial capacity. Autonomy is positively associated with FPI, mainly in higher-capacity municipalities. In SICEs, own-revenue autonomy and operational discretion are positively associated with institutional performance, whereas personnel rigidity lowers it, with tier-specific differences. Autonomy is thus not a universal lever; gains arise when aligned with capacity and strengthen decisions without eroding coordination and oversight.