Institutions anchor expectations about how power will be exercised; when these expectations are widely shared, they create the predictability needed for economic exchange, cooperation, and long-term investment (North 1990, 1991). We report results from a nationwide field experiment testing whether beliefs about the durability and inclusiveness of political institutions causally shape investments in state capacity. While canonical theories in political science and economics propose this mechanism (e.g., North, Wallis, and Weingast, 2009; Olson 1993), there is limited direct measurement of these beliefs and, to our knowledge, no causal evidence on this relationship. We conduct an experiment with 4,400 local politicians and bureaucrats in Nepal -- a nascent federal democracy at an institutional critical juncture -- who were randomly exposed to accurate information about political stability or inclusion. Treatments effectively updated beliefs about future institutions, including expectations of continuity in future rules for executive selection, protections for minority rights, and media freedom. Participants were then given the opportunity to perform a real-effort task: collecting data on births, deaths, and marriages to support the national civil registration system. Participants systematically underestimated Nepal’s current political stability, so receiving the World Bank score (in the 50th percentile globally) typically constituted a positive and surprising update. This treatment increased confidence in institutional quality and durability and raised participation in the state-building task from 22% in the control group to 26% in the treatment group (p < 0.05). In contrast, information highlighting the underrepresentation of women and historically underrepresented castes reduced optimism about future institutions and dampened task effort among these subgroups. These results indicate that perceptions of state fragility causally affect investments in state capacity. They also reveal that beliefs about political inclusion also affect policy maker investments in state capacity, offering an efficiency rationale for inclusion distinct from social justice concerns.