Workshop on Institutions, Governance and Economic Development

2 December, 2013
UNU-MERIT, Conference room
Keizer Karelplein 19, Maastricht

In partnership with the French Development Agency (AFD), the Maastricht Graduate School of Governance (MGSoG) is hosting a one day workshop on Institutions, Governance and Economic Development on 2 December 2013.

Opening and welcome at 9:00
Closing at 17:30

Speakers

  • Gani Aldashev, University of Namur
  • Richard Bluhm (speaker), Denis de Crombrugghe & Adam Szirmai, Maastricht University
  • Samyukta Bhupatiraju (speaker) & Bart Verspagen, Maastricht University
  • Luciana Cingolani (speaker), Denis de Crombrugghe & Kaj Thomsson, Maastricht University
  • Sophia Gollwitzer Franke (speaker) & Marc Quintyn, IMF
  • Carmine Guerriero (speaker) & Giuseppe Dari-Mattiacci, ACLE Amsterdam
  • Richard Jong-a-Pin, University of Groningen
  • Alina Mungiu Pippidi, Hertie School of Governance
  • Steven van de Walle, Erasmus University, Rotterdam


Participant registration

Registration closes the 25nd of November. There are only a limited number of spaces and registration closes when the workshop is full! Please register by sending an e-mail to kristine.farla@maastrichtuniveristy.nl with the following subject heading: “Registration: Institutions, Governance and Economic Development”


Endogenous Enforcement Institutions
Author: Gani Aldashev
Abstract: We model the State as a self-enforcing agreement over the use of force. Powerful individuals punish violations of contracts and property rights, and, if they shirk or abuse their power, society reverts to a low-production “anarchy” stage. Our model has two implications. First, improvements in coercion move the optimal enforcement system from private ordering, where coercive punishments are not used, to a centralised State, where punishments sanction violations by citizens but not by the ruler, to a decentralised State, where punishments sanction all violations. Second, in a centralised State, institutions that bind State militias to the law simultaneously reduce the ruler’s temptation not to punish contract violations and his temptation to expropriate citizens; thus, they are more productive than judicial institutions, which reduce the probability of unpunished violations, and hence the amount of punishment to be imposed by the ruler, but have no effect on the ruler’s temptation to expropriate. The model is consistent with the historical correlation between technological advances in coercion and the transition from private to State enforcement, and with the fact that institutional constraints on the Executive affected the long-run economic development of nations more than improvements in judicial institutions (Acemoglu and Johnson 2005). The model also provides a framework for the optimal sequencing of institutional reforms in centralised states: they should focus on the ruler’s binding enforcement constraint (punishment or non-expropriation), and switch to the other constraint only when the initially binding one becomes slack.

Do Weak Institutions Prolong Crises? On the identification, characteristics, and duration of declines during economic slumps.
Authors: Richard Bluhm, Denis de Crombrugghe & Adam Szirmai
Abstract: This paper discusses and analyzes the identification, characteristics, and duration of the decline phase during economic slumps. To identify slumps and their associated declines, we employ a restricted structural change approach and then apply this method to a large sample of countries. We find three major results. First, slumps occur frequently and in many cases the decline phase lasts very long, particularly in Sub-Saharan Africa, the Middle East and North Africa, and Latin America and the Caribbean. Second, we find strong evidence of weak institutions before slumps hit and positive institutional change thereafter. Third, the duration of declines decreases with stronger institutions but increases with greater degrees of ethnic cleavages. We provide additional evidence of a non-linear effect suggesting that institutions can potentially help to overcome even the most negative effects of high fractionalisation.

Economic Development, Growth, Institutions and Geography
Authors: Samyukta Bhupatiraju & Bart Verspagen
Abstract: In this paper, we test the Rodrik et al (2004) framework to explain differences in development levels across countries by using a broader set of definitions for institutions, geography and economic variables. We use a multi-faceted database to measure institutions in an attempt to go beyond the single-dimension measures that are often employed. We find that institutions trump other factors (geography and trade) when we use GDP per capita as an independent variable. When we expand the dependent variable to include other aspects of development, such as growth and investment, we find that institutions, growth and geography are all important variables. In this case, institutions no longer trump the other factors. In this case, we also find that the same institutions variable that was positively associated to GDP per capita is now negatively correlated with the more dynamic development variable.

Minding Weber more than ever? The impacts of State Capacity and Bureaucratic Autonomy on development goals
Author: Luciana Cingolani, Denis de Crombrugghe & Kaj Thomsson
Abstract: The notion of state capacity has attracted renewed interest over the last few years, in particular in the study of violent conflict. Yet, state capacity is conceived differently depending on whether the interest lies in the state’s power to discourage violent conflict, in its ability to administer efficiently, or simply in its capacity to foster economic development. In this article, we examine the links between state capacity and bureaucratic autonomy, and discuss the conditions under which these converge or differ. Using panel data from 1990-2010 and a novel indicator of bureaucratic autonomy, we then estimate the separate effect of state capacity and bureaucratic autonomy on two of the MDGs indicators: child mortality and the prevalence of tuberculosis. The evidence suggests that a) bureaucratic autonomy has a stronger impact than commonly used measures of state capacity; and b) that both bureaucratic autonomy and state capacity play a more important role for these indicators than traditional macroeconomic variables.

Doorsteps towards Political and Economic Openness – Testing the North Wallis Weingast Framework
Authors: Sophia Gollwitzer Franke & Marc Quintyn
Abstract: Our paper tests the theoretical framework developed by North, Wallis and Weingast (2009). They posit that limited access societies need to meet three doorstep conditions before they can transit into an open access society: (i) establishment of rule of law among elites; (ii) adoption of perpetually existing organisations; and (iii) political control of the military. We identify indicators reflecting these doorsteps and econometrically test their relationship with specific political and economic variables. We broadly confirm the logic behind the doorsteps as necessary conditions in the transition to open access societies. The doorsteps influence economic and political processes, as well as each other, with varying intensity.

Endogenous Property Rights
Authors: Carmine Guerriero & Giuseppe Dari-Mattiacci
Abstract: Albeit the relevance of property rights is well known, their determinants are still poorly understood. When property is fully protected, some buyers with valuation higher than that of original owners are inefficiently excluded from trade due to transaction costs. When protection of property is weak, low-valuation buyers inefficiently expropriate original owners. The trade-off between these two misallocations implies that property rights will be stronger the more dispersed buyers’ preferences are. This prediction survives when original owners have higher political influence on institutional design, and is consistent with novel data on the rules regulating adverse possession of personal and real property and government takings of real property in 125 jurisdictions.”

Social Capital, Economic Reforms and Growth Accelerations.
Author: Richard Jong-a-Pin
Abstract: Social capital, commonly defined as generalised trust, is proven to be one of the factors driving economic growth along with traditional forms of capital. In the long-run, the formulation of social capital depends on formal institutions. In the short-run however, it is a fairly static variable that we hypothesise might affect the effectiveness of economic reforms. Thus we argue that in high social capital environments, economic reforms might have an increased probability of triggering growth accelerations vis-à-vis low social capital environments. Furthermore, due to its influence on the efficiency of governance in democratic regimes, we hypothesise that there will be clear difference in the success of economic reforms in terms of growth accelerations. Hence, economic reforms undertaken by a democratic regime, will underperform in comparison to reforms by an autocratic regime in a low social capital environment, and outperform in high social capital environment. Focusing our attention on the determinants of growth acceleration episodes, a newly established line of research that takes into account the short-run volatility of growth rates, we find that social capital per se, contrary to our priors, turns out to have a negative effect on the outcomes of reforms. However, when the interaction with political regimes is introduced, we find a robust positive influence of social capital in democratic regimes, and a negative effect for autocratic

Second Generation Good Governance Indicators
Speaker: Alina Mungiu-Pippidi
Abstract: The European Commission DG Home and Justice has published in the summer of 2011 a communication on its new initiative to monitor capacity of EU member states in controlling corruption. The motivation for this decision is to be found in the majority of EU public opinion which perceives corruption presently among major threats at EU, national and sub-national government in the Eurobarometer survey. The challenge, however, is on which indicators to anchor such a mechanism. The most widely used indicators are subjective ones- like the famous Transparency International Corruption Perception Index. Policymakers, especially at EU level are very reluctant to ground any recommendations on subjective measurements. Governance is the mix of formal and informal rules deciding who gets what in a certain polity. Ideally, the main principle at the basis of modern governance is ethical universalism (every citizen is treated similarly) and the state is autonomous towards private interest. This is known in literature as ‘good governance’. In practice, however, few countries have managed to reach this ideal so far and allocation of public goods and services is made on the basis of particularism. Such a preferential distribution can be legal or illegal, for personal or group undue profit or for reciprocity. We call this ‘bad governance’ or corruption, though in many countries and disciplines corruption is seen more narrowly as only the situation when corrupt exchanges have only a monetary illicit character (bribes). Measuring governance is a considerable challenge, seeing the versatility and broadness of the concept. Governance indicators differ across (at least) two important dimensions. First, some indicators measure relatively specific aspects of the quality of governance while others are more general and highly aggregated. Second, some indicators are more transparently constructed and replicable, whereas others are less so – for example, subjective ratings provided by firms assessing political risks to foreign investors. In policy, we need indicators that are as specific and disaggregated as possible so to be able to recommend countries how to change them. For other purposes, such as making broad comparisons across countries, or conducting research on the causes and consequences of good governance broadly defined, highly aggregated indicators are often preferred. I will reflect on advantages and disadvantages of the two set and present the work of ANTICORRP progress in towards building a second generation of indicators, sensitive to change and policy intervention

The Political Role of Service Delivery in State-Building
Author: Steven van de Walle
Abstract: As part of state-building strategies, international donors are increasingly focusing on strengthening state public services in recipient countries. In earlier decades, they had tended to avoid the state in their efforts to provide public services such as health, education, sanitation, etc. to the poor, and instead relied on provision through markets, non-profit organisations, NGOs and other types of voluntary organisations. Recently, however, they have begun to investigate whether such strategies, geared towards efficient and effective public-service delivery, may affect state capacity and citizens’ identification with the state.  Concerns about failed and fragile states have put state- and nation-building firmly on the academic and policy agenda, but the crucial role of public services in this process has remained underexplored. The older literature identified state penetration, standardisation, and accommodation as key processes in the state- and nation-building sequence.