Review article: Good governance, institutions and economic development: Beyond the conventional wisdom

British Journal of Political Science

Volumn 40, Issue 1, 2010, Pages 195-224

  Dellepiane Avellaneda, Sebastian ^a  

^a UNIVERSITY COLLEGE DUBLIN   (Ireland)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 77957128167     PISSN: 00071234     EISSN: 14692112     Source Type: Journal    
DOI: 10.1017/S0007123409990287     Document Type: Review

References (312)

1. Daniel Kaufmann, Aart Kraay and Pablo Zoido-Lobaton, 'Governance Matters: From Measurement to Action', Finance & Development, 37 (2000), 1-6, available at http://www.imf.org/external/pubs/ft/fandd/2000/06/kauf.htm.
2. See, e.g., Stephen Knack and Philip Keefer, 'Institutions and Economic Performance: Cross Country Tests Using Alternative Institutional Measures', Economics and Politics, 7 (1995), 207-27;
3. Paulo Mauro, 'Corruption and Growth', Quarterly Journal of Economics, 110 (1995), 681-712;
4. Christopher Clague, Institutions and Economic Development (Baltimore, Md.: John Hopkins University Press, 1997);
5. Alberto Alesina, 'The Political Economy of High and Low Growth', in World Bank, Annual World Bank Conference on Development Economics 1997 (Washington, D.C.: IBRD, 1998), pp. 217-37;
6. Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer and Robert W. Vishny, 'The Quality of Government', Journal of Law, Economics and Organisation, 15 (1998), 222-79;
7. Bruce Bueno de Mesquita and Hilton Root, eds, Governing for Prosperity (New Haven, Conn.: Yale University Press, 2000);
8. Stephen Knack, Democracy, Governance, & Growth (Ann Arbor: University of Michigan Press, 2003);
9. Yi Feng, Democracy, Governance and Economic Performance (Cambridge, Mass.: MIT Press, 2003).
10. Knack, Democracy, Governance, & Growth, p. 1.
11. Thomas G. Weiss, 'Governance, Good Governance and Global Governance: Conceptual and Actual Challenges', Third World Quarterly, 21 (2000), 795-814.
12. Alberto Chong and Cesar Calderon, 'On the Causality and Feedback between Institutional Measures and Economic Growth', Economics and Politics, 12 (2000), 69-81;
13. Edward Glaeser, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer, 'Do Institutions Cause Growth?' Journal of Economic Growth, 9 (2004), 271-303;
14. Adam Przeworski, 'The Last Instance: Are Institutions the Primary Cause of Economic Development?' European Journal of Sociology, 45 (2004), 165-88.
15. Pranab Bardhan, Scarcity, Conflicts, and Cooperation: Essays in the Political and Institutional Economics of Development (Cambridge, Mass.: MIT Press, 2005).
16. Glaeser et al., 'Do Institutions Cause Growth?'
17. Marcus J. Kurtz and Andrew Schrank, 'Growth and Governance: Models, Measures, and Mechanisms', Journal of Politics, 69 (2007), 538-54.
18. Steven N. Durlauf, Paul A. Johnson and Jonathan R.W. Temple, 'Growth Econometrics', in Philippe Aghion and Steven Durlauf, eds, Handbook of Economic Growth: Volume 1A (New York: Elsevier North-Holland, 2005), pp. 555-677.
19. Elhanan Helpman, The Mystery of Economic Growth (Cambridge, Mass.: Harvard University Press, 2004).
20. Daniel Kaufmann, 'Rethinking Governance: Empirical Lessons Challenge Orthodoxy' (World Bank Discussion Paper, 2003), pp. 1-47, at p. 27, available at http://www.worldbank.org/wbi/governance/pdf/rethink-gov-stanford.pdf.
21. For an insightful analysis of what we know, and what we do not know, about the economic and political sources of economic growth, see Helpman, The Mystery of Economic Growth.
22. For comprehensive reviews of this vast literature, see Robert J. Barro and Xavier Sala-i-Martin, Economic Growth (New York: McGraw-Hill, 1995);
23. Robert J. Barro, Determinants of Economic Growth (Cambridge, Mass.: The MIT Press, 1998);
24. Aghion and Durlauf, Handbook of Economic Growth.
25. Helpman, The Mystery of Economic Growth.
26. For a thorough review of the new political economy of growth, see Allan Drazen, Political Economy in Macroeconomics (Princeton, N.J.: Princeton University Press, 2000), pp. 457-525.
27. Feng, Democracy, Governance and Economic Performance.
28. Adam Przeworski, Michael E. Alvarez, José Antonio Cheibub and Fernando Limongi, Democracy and Development: Political Institutions and Well-Being in the World, 1950-1990 (Cambridge: Cambridge University Press, 2000), p. 178.
29. Feng, Democracy, Governance and Economic Performance, pp. 320-1 (emphasis added).
30. On these ambiguous results, see also L. Sirowy and A. Inkeles, 'The Effects of Democracy on Economic Growth and Inequality: A Review', Studies in Comparative International Development, 25 (1990), 126-57;
31. Adam Przeworski and Fernando Limongi, 'Political Regimes and Economic Growth', Journal of Economic Perspectives, 7 (1993), 51-70;
32. Jan-Erik Lane and Svante Ersson, Democracy: A Comparative Approach (New York: Routledge, 2003).
33. Another research stream has looked at the 'indirect' effect of democracy on growth. In particular, there is evidence that democracy contributes to growth through better income distribution and improvements in public health and education. See, e.g., Feng, Democracy, Governance and Economic Performance;
34. Matthew A. Baum and David A. Lake, 'The Political Economy of Growth: Democracy and Human Capital', American Journal of Political Science, 47 (2003), 333-47;
35. David S. Brown and Wendy Hunter, 'Democracy and Human Capital Formation: Education Spending in Latin America', Comparative Political Studies, 37 (2004), 842-64.
36. Earlier attempts to test the impact of property rights on growth in international regressions include: Roger C. Kormendi and Philip G. Meguire, 'Macroeconomic Determinants of Growth', Journal of Monetary Economics, 16 (1985), 141-63;
37. Kevin B. Grier and Gordon Tullock, 'An Empirical Analysis of Cross-National Economic Growth, 1951-80', Journal of Monetary Economics, 24 (1989), 259-76;
38. Gerald W. Scully, 'The Institutional Framework and Economic Development', Journal of Political Economy, 96 (1988), 652-62.
39. Knack and Keefer, 'Institutions and Economic Performance'.
40. Mauro, 'Corruption and Growth'.
41. Alesina, 'The Political Economy of High and Low Growth'.
42. See, e.g., La Porta et al., 'The Quality of Government';
43. Robert E. Hall and Charles I. Jones, 'Why Do Some Countries Produce So Much More Output per Worker than Others?' Quarterly Journal of Economics, 114 (1999), 83-116;
44. Daron Acemoglu, Simon Johnson and James A. Robinson, 'The Colonial Origins of Comparative Development', American Economic Review, 91 (2001), 1369-401;
45. Daron Acemoglu, Simon Johnson and James A. Robinson, 'Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution', Quarterly Journal of Economics, 117 (2002), 1231-94;
46. William Easterly and Ross Levine, 'Tropics, Germs, and Crops: How Endowments Influence Economic Development', Journal of Monetary Economics, 50 (2003), 3-39;
47. Dani Rodrik, Arvind Subramanian and Francesco Trebbi, 'Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development', Journal of Economic Growth, 9 (2004), 131-65.
48. For a review of this literature, see Daron Acemoglu, Simon Johnson and James A. Robinson, 'Institutions as the Fundamental Cause of Long-Run Growth', in Aghion and Durlauf, Handbook of Economic Growth, pp. 385-472.
49. Mancur Olson, 'Big Bills Left on the Sidewalk: Why Some Nations Are Rich and Others Poor', Journal of Economic Perspectives, 10 (1996), 3-24.
50. See also Knack, Democracy, Governance, & Growth.
51. Daniel Kaufmann and Aart Kraay, 'Growth without Governance', Economia: The Journal of the Latin American and Caribbean Economic Association, 3 (2003), 169-215, p. 169.
52. Problems may arise not only because causality runs from income to institutions, but also because the institutional variables are measured at the end (or too close to the end) of the growth period.
53. Chong and Calderon, 'On the Causality and Feedback between Institutional Measures and Economic Growth'.
54. Kaufmann and Kraay, 'Growth without Governance'.
55. Acemoglu et al., 'The Colonial Origins of Comparative Development'.
56. Glaeser et al., 'Do Institutions Cause Growth?' p. 285.
57. A recent paper, using dynamic panel and linear feedback analysis, shows that there is double causality between institutions and inequality. See Alberto Chong and Mark Gradstein, 'Inequality and Institutions', Review of Economic and Statistics, 89 (2007), 454-65.
58. E.g., Jeffrey D. Sachs, 'Tropical Underdevelopment', NBER Working Paper No. 8119 (Cambridge, Mass.: National Bureau of Economic Research, 2001).
59. E.g., Kenneth L. Sokoloff and Stanley L. Engerman, 'History Lessons: Institutions, Factor Endowments, Institutions, and Paths of Development in the New World', Journal of Economic Perspectives, 14 (2000), 217-32.
60. E.g., Hall and Jones, 'Why Do Some Countries Produce So Much More Output per Worker than Others?'
61. Douglass C. North, William Summerhill and Barry R. Weingast, 'Order, Disorder, and Economic Change: Latin America versus North America', in Bueno de Mesquita and Root, eds, Governing for Prosperity, pp. 17-58.
62. E.g., La Porta et al., 'The Quality of Government'; Simeon Djankov, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer, 'Courts', Quarterly Journal of Economics, 118 (2003), 453-517.
63. E.g., William Easterly and Ross Levine, 'Africa's Growth Tragedy: Policies and Ethnic Divisions', Quarterly Journal of Economics, 111 (1997), 1203-50;
64. Philip Keefer and Stephen Knack, 'Polarization, Politics and Property Rights', Public Choice, 111 (2002), 127-54;
65. Alberto Alesina, Arnaud Devleeschauwer, William Easterly and Romain Wacziarg, 'Fractionalization', Journal of Economic Growth, 8 (2003), 155-94.
66. E.g., La Porta et al., 'The Quality of Government'.
67. Bardhan, Scarcity, Conflicts, and Cooperation, pp. 7-19;
68. Robert H. Bates, 'The Role of the State in Development', in Barry R. Weingast and Donald Wittman, eds, The Oxford Handbook of Political Economy (Oxford: Oxford University Press, 2006), pp. 708-22;
69. Mick Moore, 'Revenues, State Formation, and the Quality of Governance in Developing Countries', International Political Science Review, 25 (2004), 297-319.
70. On the role of the state in East Asia, see also Alice Amsden, Asia's Next Giant: South Korea and Late Industrialization (Oxford: Oxford University Press, 1989);
71. Robert Wade, Governing the Market (Princeton, N.J.: Princeton University Press, 1990);
72. Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, N.J.: Princeton University Press, 1995).
73. For large-N studies on the effects of state structures, see Peter Evans and James Rauch, 'Bureaucracy and Growth: A Cross-National Analysis of the Effects of Weberian State Structures on Economic Growth', American Economic Review, 64 (1999), 748-65;
74. James Rauch and Peter Evans, 'Bureaucratic Structure and Economic Performance in Less Developed Countries', Journal of Public Economics, 75 (2000), 49-71.
75. For a recent effort to bring the state back into the discussion, see Matthew Lange and Dietrich Rueschemeyer, eds, States and Development (Basingstoke, Hants.: Palgrave Macmillan, 2005).
76. Helpman, The Mystery of Economic Growth, pp. 136-8.
77. Acemoglu et al., 'The Colonial Origins of Comparative Development'.
78. See also Easterly and Levine, 'Tropics, Germs, and Crops';
79. Rodrik et al. 'Institutions Rule'.
80. Acemoglu et al., 'Institutions as the Fundamental Cause of Long-Run Growth', p. 463.
81. Helpman, The Mystery of Economic Growth, p. 125.
82. Przeworski, 'The Last Instance', p. 166.
83. S. N. Sangmpam, 'Politics Rules: The False Primacy of Institutions in Developing Countries', Political Studies, 55 (2007), 205-7.
84. Uncertainties remain even within the 'institutions rule' consensus. For example, in a review article Rodrik qualifies the strong institutionalist flavour of Rodrik et al.'s 'Institutions Rule', suggesting that that work should not be seen in the frontline of institutions fundamentalism (see Dani Rodrik, 'Goodbye Washington Consensus, Hello Washington Confusion?' Journal of Economic Literature, 44 (2006), 973-87, p. 979).
85. Similarly, Robinson, one of the co-authors of AJR, says that the Latin American equilibrium of poor institutions is deeply rooted in a given distribution of political power (see James A. Robinson, 'El Equilibrio de America Latina', in Francis Fukuyama, ed., La Brecha entre America Latina y Estados Unidos: Determinantes politicos e institucionales del desarrollo economico (Buenos Aires: Fondo de Cultura Economica, 2006), pp. 197-230).
86. Todd Landman and Julia Häusermann, 'Map-Making and Analysis of the Main International Initiatives on Developing Indicators on Democracy and Good Governance' (unpublished paper, Human Rights Centre, University of Essex, 2003).
87. See, e.g., Alex Inkeles, On Measuring Democracy: Its Consequences and Concomitants (Brunswick, N.J.: Transaction Publishers, 1991);
88. Joe Foweraker and Roman Krznaric, 'Measuring Liberal Democratic Performance', Political Studies, 47 (2000), 759-87;
89. Gerardo L. Munck and Jay Verkuilen, 'Conceptualizing and Measuring Democracy: Evaluating Alternative Indices', Comparative Political Studies, 35 (2002), 5-34;
90. Robert A. Dahl, Ian Shapiro and José Antonio Cheibub, eds, The Democracy Sourcebook (Cambridge, Mass.: MIT Press, 2003);
91. Kirk Bowman, Fabrice Lehouck and James Mahoney, 'Measuring Political Democracy: Case Expertise, Data Adequacy and Central America', Comparative Political Studies, 38 (2005), 939-70.
92. For interesting developments in this area, see Weiss, 'Governance, Good Governance and Global Governance';
93. Landman and Häusermann, 'Map-Making and Analysis of the Main International Initiatives on Developing Indicators on Democracy and Good Governance';
94. Knack, Democracy, Governance, & Growth;
95. Christopher Woodruff, 'Measuring Institutions', in Susan Rose-Ackerman and Henry Luce, eds, International Handbook on the Economics of Corruption (Northampton: Edward Elgar, 2006);
96. Christiane Arndt and Charles Oman, Uses and Abuses of Governance Indicators (Paris: OECD Development Centre Studies, 2006);
97. and the insightful exchange between Kurtz and Schrank, 'Growth and Governance',
98. and Daniel Kaufmann, Aart Kraay and Massimo Mastruzzi, 'Growth and Governance: A Reply', Journal of Politics, 69 (2007), 555-62.
99. Knack and Keefer, 'Institutions and Economic Performance';
100. Mauro, 'Corruption and Growth'.
101. The first generation of empirical studies on institutions and growth measured countries' institutional environment through Gastil indices (e.g., Kormendi and Meguire, 'Macroeconomic Determinants of Growth';
102. Grier and Tullock, 'An Empirical Analysis of Cross-National Economic Growth';
103. Scully, 'The Institutional Framework and Economic Development')
104. or objective counts of political violence (e.g., Robert J. Barro, 'Economic Growth in a Cross Section of Countries', Quarterly Journal of Economics, 106 (1991), 407-43;
105. Alberto Alesina, Sule Ozler, Nouriel Roubini and Phillip Swagel, 'Political Instability and Economic Growth', Journal of Economic Growth, 1 (1996), 189-211).
106. However, those measures delivered questionable proxies of concepts such as the rule of law, contract enforceability and the security of property rights. See Stephen Knack, 'Governance and Growth: Measurement and Evidence' (paper presented at the Forum on the Role of Institutions in Promoting Growth, IRIS Center and USAID, Washington, D.C., 2002).
107. Glaeser et al., 'Do Institutions Cause Growth?' p. 271.
108. Douglass C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990), p. 3.
109. At the conceptual level, these authors claim that 'human capital is a more basic source of growth than are the institutions' and that 'poor countries get out of poverty through good policies, often pursued by dictators'. See Glaeser et al., 'Do Institutions Cause Growth?' p. 271.
110. Kurtz and Schrank, 'Growth and Governance', p. 538.
111. For a defence of the World Bank Governance Indicators, see Daniel Kaufmann, Aart Kraay and Massimo Mastruzzi, 'Measuring Governance Using Cross-Country Perceptions Data', in Rose-Ackerman and Luce, eds, International Handbook on the Economics of Corruption;
112. Daniel Kaufmann and Aart Kraay, 'Governance Indicators: Where Are We, Where Should We Be Going?' World Bank Research Observer, 23 (2008), 1-30.
113. Bardhan, Scarcity, Conflicts, and Cooperation.
114. Helpman, The Mystery of Economic Growth;
115. Douglass C. North, Understanding the Process of Economic Change (Princeton, N.J.: Princeton University Press, 2005).
116. Bo Rothstein, 'Political Institutions: An Overview', in Robert E. Goodin and Hans-Dieter Klingemann, eds, A New Handbook of Political Science (Oxford: Oxford University Press, 1996), pp. 133-66, at p. 152.
117. George Tsebelis, Nested Games: Rational Choice in Comparative Politics (San Francisco: University of California Press, 1990), p. 98.
118. Geoffrey Brennan and James M. Buchanan, The Reason of Rules: Constitutional Political Economy (Cambridge: Cambridge University Press, 1985).
119. Olson, 'Big Bills Left on the Sidewalk', p. 21.
120. See Rodrik et al., 'Institutions Rule'.
121. Gerardo della Paolera and Alan M. Taylor, eds, A New Economic History of Argentina (Cambridge: Cambridge University Press, 2003), p. 3.
122. Sebastian Dellepiane-Avellaneda, 'The Political Economy of Institutional Credible Commitments: The Case of Argentina's Convertibility Law, 1991-2001' (doctoral dissertation, University of Essex, 2005).
123. Alesina, 'The Political Economy of High and Low Growth'.
124. Guido Di Tella and Rudiger Dornbusch, eds, The Political Economy of Argentina, 1946-83 (Basingstoke, Hants.: Macmillan, 1989), p. 7.
125. Richard Mallon and Juan Sourrouille, Economic Policymaking in a Conflict Society: The Argentine Case (Cambridge, Mass.: Harvard University Press, 1975), p. 154.
126. Sangmpam, 'Politics Rules'.
127. Yi Feng, 'Political Institutions, Economic Growth, and Democratic Evolution: The Pacific Asian Scenario', in Bueno de Mesquita and Root, eds, Governing for Prosperity, pp. 172-208.
128. Feng, Democracy, Governance and Economic Performance.
129. For example, Sangmpam in 'Politics Rules' proposes the breaking up of the political system into its three components: politics, institutions and the state itself.
130. North, Institutions, Institutional Change and Economic Performance.
131. Kenneth A. Shepsle, 'Studying Institutions', Journal of Theoretical Politics, 1 (1989), 131-47, p. 138;
132. Kenneth A. Shepsle, 'Old Questions and New Answers about Institutions: The Riker Objection Revisited', in Weingast and Wittman, eds, The Oxford Handbook of Political Economy, pp. 1031-49.
133. William H. Riker, 'Implications from the Disequilibrium of Majority Rule for the Study of Institutions', American Political Science Review, 74 (1980), 432-46.
134. Melvin J. Hinich and Michael C. Munger, Analytical Politics (Cambridge: Cambridge University Press, 1997).
135. Formally, equilibrium is a 'status quo position in the policy space that cannot be defeated by another feasible position' (Hinich and Munger, Analytical Politics, p. 52). In this article, equilibrium refers to a 'stable policy outcome'. The latter is equilibrium provided that the main actors involved do not have incentives to change their behaviour given what others are likely to do in response.
136. North, Institutions, Institutional Change and Economic Performance.
137. North, Understanding the Process of Economic Change, p. 62.
138. See also Arthur Denzau and Douglass C. North, 'Shared Mental Models: Ideologies and Institutions', Kyklos, 47 (1994), 3-31;
139. Jack Knight and Douglass C. North, 'Explaining Economic Change: The Interplay between Cognition and Institutions', Legal Theory, 3 (1997), 211-26.
140. Douglass C. North, 'Economic Performance through Time', American Economic Review, 84 (1994), 359-68.
141. Stephen Knack and Philip Keefer, 'Does Social Capital Have an Economic Payoff? A Cross-country Empirical Investigation', in Knack, Democracy, Governance, & Growth, pp. 252-90.
142. Jonathan Temple and Paul A. Johnson, 'Social Capability and Economic Growth', Quarterly Journal of Economics, 113 (1998), 965-90.
143. North, Understanding the Process of Economic Change, p. 48 (emphasis added).
144. Douglass C. North, 'What Is Missing from Political Economy', in Weingast and Wittman, The Oxford Handbook of Political Economy, pp. 1003-9.
145. Jonas Pontusson, 'From Comparative Public Policy to Political Economy: Putting Political Institutions in Their Place and Taking Interests Seriously', Comparative Political Studies, 28 (1995), 117-47, p. 117.
146. T. M. Moe, 'Political Institutions: The Neglected Side of the Story', Journal of Law, Economics, and Organizations, 6 (1990), 213-53, p. 213.
147. See North, Institutions, Institutional Change and Economic Performance;
148. Tsebelis, Nested Games;
149. Jack Knight, Institutions and Social Conflict (Cambridge: Cambridge University Press, 1992);
150. Kathleen Thelen and Sven Steinmo, 'Historical Institutionalism in Comparative Politics', in Sven Steinmo, Kathleen Thelen and Frank Longstreth, eds, Structuring Politics (Cambridge: Cambridge University Press, 1992), pp. 1-32;
151. Peter A. Hall, 'The Role of Interests, Institutions, and Ideas in the Comparative Political Economy of Industrialized Nations', in Mark Lichbach and Alan Zuckerman, eds, Comparative Politics (Cambridge: Cambridge University Press, 1997), pp. 174-207;
152. Paul Pierson and Theda Skocpol, 'Historical Institutionalism in Contemporary Political Science', in Ira Katznelson and Helen Milner, eds, Political Science: The State of the Discipline (New York: Norton, 2002), pp. 693-721.
153. For a classical account of the distributive politics of development, see Robert H. Bates, 'Macropolitical Economy in the Field of Development', in James Alt and Kenneth Shepsle, eds, Perspectives on Positive Political Economy (Cambridge: Cambridge University Press, 1990), pp. 31-54.
154. Bardhan, Scarcity, Conflicts, and Cooperation, p. 27.
155. Bardhan, Scarcity, Conflicts, and Cooperation, p. 30.
156. Bardhan, Scarcity, Conflicts, and Cooperation, p. 2.
157. Peter A. Hall and David Soskice, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (Oxford: Oxford University Press, 2001).
158. For an application in transition countries, see Magnus Feldmann, 'Emerging Varieties of Capitalism in Transition Countries: Industrial Relations and Wage Bargaining in Estonia and Slovenia', Comparative Political Studies, 39 (2006), 829-54.
159. Douglass C. North, Understanding the Process of Economic Change (London: Institute of Economic Affairs, 1999), p. 23.
160. See, for example, Stephen Haber, Armando Razo and Noel Maurer, The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876-1929 (Cambridge: Cambridge University Press, 2003).
161. Douglass C. North, 'Institutions and Credible Commitment', Journal of Institutional and Theoretical Economics, 149 (1993), 11-23, p. 11.
162. Barry R. Weingast, 'The Economic Role of Political Institutions: Market-preserving Federalism and Economic Development', Journal of Law, Economics, and Organization, 11 (1995), 1-31, p. 1.
163. See Oliver E. Williamson, The Economic Institutions of Capitalism (New York: Free Press, 1985);
164. Kenneth A. Shepsle, 'Discretion, Institutions and the Problem of Government Commitment', in Pierre Bourdieu and James Coleman, eds, Social Theory for a Changing Society (Boulder, Colo.: Western Press, 1991), pp. 245-63;
165. Douglass C. North and Barry R. Weingast, 'Constitutions and Commitments', Journal of Economic History, 19 (1989), 803-32;
166. Brian Levy and Pablo T. Spiller, 'The Institutional Foundations of Regulatory Commitment', Journal of Law, Economics and Organisation, 10 (1996), 201-46.
167. C. Mantzavinos, Individuals, Institutions, and Markets (Cambridge: Cambridge University Press, 2001), p. 245.
168. J. E. Campos and Hilton L. Root, The Key to the East Asian Miracle: Making Shared Growth Credible (Washington, D.C.: The Brookings Institution, 1996).
169. Campos and Root, The Key to the East Asian Miracle, p. 7.
170. Carles Boix, Democracy and Redistribution (Cambridge: Cambridge University Press, 2003).
171. Barry R. Weingast, 'Rational-Choice Institutionalism', in Katznelson and Milner, eds, Political Science, pp. 660-92. fn 123 (19-41).
172. Przeworski, 'The Last Instance'.
173. See Riker, 'Implications from the Disequilibrium of Majority Rule for the Study of Institutions';
174. Tsebelis, Nested Games;
175. Robert H. Bates, 'Contra Contractarianism', Politics and Society, 16 (1988), 387-401;
176. Peter C. Ordeshook, 'The Emerging Discipline of Political Economy', in Alt and Shepsle, Perspectives on Positive Political Economy, pp. 9-30.
177. Shepsle, 'Studying Institutions'.
178. Tsebelis, Nested Games.
179. Weingast, 'Rational-Choice Institutionalism'.
180. See, e.g. Knack, Democracy, Governance, & Growth;
181. Chong and Gradstein, 'Inequality and Institutions'.
182. Weiss, 'Governance, Good Governance and Global Governance', p. 796.
183. The 1997 World Development Report signalled a pivotal change in the development game by stating that 'good government is not a luxury; it is a vital necessity for development' (World Bank, The Role of the State in a Changing World (Oxford: Oxford University Press, 1997)).
184. At almost the same time, the IMF declared that 'a much broader range of institutional reforms is needed if countries are to establish and maintain private sector confidence and thereby lay the basis for sustained growth' (International Monetary Fund, Good Governance: The IMF's Role (Washington, D.C.: IMF, 1997)).
185. Some critics argued that the good-governance discourse aimed at legitimizing the new politics of development. See Uma Kothari and Martin Minogue, Development Theory and Practice: Critical Perspectives (Basingstoke, Hants.: Palgrave, 2002).
186. Kaufmann, 'Rethinking Governance', p. 3 (emphasis added).
187. Alesina, 'The Political Economy of High and Low Growth', p. 217.
188. Alesina, 'The Political Economy of High and Low Growth', p. 217 (emphasis added).
189. For example, the analysis covers neither the critical 1990s nor the periods in which most of today's rich countries became developed.
190. Another issue is the distributional implications of institutional conditionality. Which actors are going to bear the burden of the policy? What is the role and bargaining power of those actors in the game of institutional change?
191. Feng, Democracy, Governance and Economic Performance, p. 37.
192. Przeworski, 'The Last Instance', p. 168.
193. Feng, Democracy, Governance and Economic Performance, p. 86.
194. Knack, Democracy, Governance, & Growth, p. 294. With the aim of unbundling particular manifestations of misgovernance, the World Bank and other organizations have begun to develop surveys and in-depth in-country governance diagnostics.
195. Mauro, 'Corruption and Growth', pp. 681-712.
196. See, e.g., Alberto Ades and Rafael Di Tella, 'The New Economics of Corruption: A Survey and Some New Results', Political Studies, 45 (1997), 496-515;
197. Vito Tanzi, 'Corruption around the World', IMF Staff Papers, 45 (1998), 559-94.
198. Fortunately, the scholarship on the institutional foundations of corruption is thriving. See Torsten Persson and Guido Tabellini, The Economic Effects of Constitutions (Cambridge, Mass.: MIT Press, 2003);
199. Gabriella R. Montinola and Robert W. Jackman, 'Sources of Corruption: A Cross-Country Study', British Journal of Political Science, 32 (2002), 147-70;
200. John Gerring and Strom Thacker, 'Political Institutions and Corruption: The Role of Unitarism and Parliamentarism', British Journal of Political Science, 34 (2004), 295-330;
201. Jana Kunicova and Susan Rose-Ackerman, 'Electoral Rules and Constitutional Structures as Constraints on Corruption', British Journal of Political Science, 35 (2005), 573-606;
202. Eric C. Chang and Miriam A. Golden, 'Electoral Systems, District Magnitude and Corruption', British Journal of Political Science, 37 (2007), 115-37. For a review of the political economy of corruption, see Rose-Ackerman and Luce, International Handbook on the Economics of Corruption.
203. Dani Rodrik, In Search of Prosperity: Analytic Narratives on Economic Growth (Princeton, N.J.: Princeton University Press, 2003), p. 8.
204. Kaufmann, 'Rethinking Governance'.
205. Knack, Democracy, Governance, & Growth, p. 295 (emphasis added).
206. Eggertsson, Imperfect Institutions.
207. See especially Douglass C. North, 'Five Propositions about Institutional Change', in Jack Knight and Itai Sened, eds, Explaining Social Institutions (Ann Arbor: University of Michigan Press, 1995), pp. 15-26, at p. 20.
208. As Levi explains: '[P]ath dependence has to mean, if it has to mean anything, that once a country or region has started down a track, the costs of reversal are very high. There will be other choice points, but the entrenchments of certain institutional arrangements obstruct any easy reversal of the initial choice' (see Margaret Levi, 'A Model, a Method, and a Map', in Lichbach and Zuckerman, eds, Comparative Politics, pp. 19-41, at p. 28 (emphasis added)).
209. In his last book, North stresses that beliefs are at the core of the process of change. The complex structure of institutions affecting political economy performance is the result of beliefs and the way they are altered by feedback from changed perceived reality. See North, Understanding the Process of Economic Change, p. 4.
210. See Knack, Democracy, Governance, & Growth; Bardhan, Scarcity, Conflicts, and Cooperation.
211. For an innovative attempt to look at the cognitive constraints to development, see Elisa Reis and Mick Moore, eds, Elite Perceptions of Poverty and Inequality (London: Zed Books, 2005).
212. North, Understanding the Process of Economic Change, pp. 163-4.
213. Rodrik, In Search of Prosperity, p. 15.
214. Rodrik, In Search of Prosperity, p. 12.
215. See also Dani Rodrik, 'Growth Strategies', in Aghion and Durlauf, Handbook of Economic Growth, pp. 967-1014.
216. See, e.g., World Bank, Economic Growth in the 1990s: Learning from a Decade of Reform (Washington, D.C.: IBRD, 2005).
217. However, Rodrik shows that there are contending interpretations in the Washington community in relation to the role of institutions. See Rodrik, 'Goodbye Washington Consensus, Hello Washington Confusion?'
218. Kaufmann, 'Rethinking Governance'.
219. Knack, Democracy, Governance, & Growth, p. 7.
220. Even Chile, Latin America's growth star, still has very high levels of inequality (though poverty has declined markedly).
221. On the historical impossibility of reconciling growth and equity in Latin America, see Fernando Fajnzylber, Unavoidable Industrial Restructuring in Latin America (Durham, N.C.: Duke University Press, 1990).
222. But see, e.g., R. Jenkins, 'The Political Economy of Industrialization: A Comparison of Latin American and East Asian NICs', Development and Change, 22 (1991), 197-231;
223. Cristobal Kay, 'Why East Asia Overtook Latin America', Third World Quarterly, 23 (2002), 1073-102;
224. World Bank, The East Asian Miracle: Economic Growth and Public Policy (Oxford: Oxford University Press, 1993);
225. Nancy Birdsall, David Ross and Richard Sabot, 'Inequality and Growth Reconsidered: Lessons from East Asia', World Bank Economic Review, 9 (1995), 477-508;
226. Gustav Ranis, 'Another Look at the East Asian Miracle', World Bank Economic Review, 9 (1995), 509-34.
227. See Alesina, 'The Political Economy of High and Low Growth';
228. Feng, Democracy, Governance and Economic Performance.
229. See Glaeser et al., 'Do Institutions Cause Growth?'
230. Nowhere is this pattern clearer than in Argentina, where the collapse of the convertibility system in 2001 destroyed the reputation of self-finding structural reforms and led to the adoption of a discretionary approach to policy making.
231. See Alesina, 'The Political Economy of High and Low Growth',
232. and Feng, Democracy, Governance and Economic Performance.
233. On the link between political order and economic growth, see North et al., 'Order, Disorder, and Economic Change';
234. Robert H. Bates, Prosperity & Violence (New York: Norton, 2001).
235. For an interesting debate on constitutional political economy, see Torsten Persson and Guido Tabellini, The Economic Effects of Constitutions (Cambridge, Mass.: MIT Press, 2003);
236. and Daron Acemoglu, 'Constitutions, Politics, and Economics: A Review Essay on Persson and Tabellini's The Economic Effects of Constitutions', Journal of Economic Literature, 43 (2005), 1025-48.
237. Mantzavinos, Individuals, Institutions, and Markets, p. 245.
238. North, Understanding the Process of Economic Change.
239. See especially, Knack, Democracy, Governance, & Growth, pp. 1-24.
240. See, e.g., Keefer and Knack, 'Polarization, Politics and Property Rights';
241. William Easterly, Josef Ritzen and Michael Woolcock, 'Social Cohesion, Institutions and Growth', Economics and Politics, 18 (2006), 103-20.
242. Witold J. Henisz, 'The Institutional Environment for Economic Growth', Economics and Politics, 12 (2000), pp. 1-31.
243. George Tsebelis, Veto Players: How Political Institutions Work (Princeton, N.J.: Princeton University Press, 2002), p. 204.
244. On this trade-off, see George Philip, 'The Dilemmas of Good Governance: A Latin American Perspective', Government and Opposition, 34 (1999), 226-42.
245. Weingast, 'The Economic Role of Political Institutions'.
246. Bardhan, Scarcity, Conflicts, and Cooperation, p. 62.
247. See, e.g., Barry R. Weingast, 'The Political Foundations of Democracy and the Rule of Law', American Political Science Review, 91 (1997), 245-63;
248. Boix, Democracy and Redistribution.
249. Avner Greif, 'Self-Enforcing Political Systems and Economic Growth', in Robert Bates, Avner Greif, Margaret Levi, Jean-Laurent Rosenthal and Barry Weingast, eds, Analytic Narratives (Princeton N.J.: Princeton University Press, 1998), pp. 2-63, at p. 60.
250. Similarly, Eggertsson shows that 'favourable background factors' conditioned Botswana's economic miracle (see Eggertsson, Imperfect Institutions, pp. 170-3). Specific political conditions have also supported credible commitment and sustained growth in Chile in the last decades.
251. Drazen, Political Economy in Macroeconomics, p. 459.
252. See also Alberto Alesina and Roberto Perotti, 'The Political Economy of Growth: A Critical Survey of the Recent Literature', World Bank Economic Review, 8 (1994), 351-71;
253. Robert J. Barro, 'Inequality and Growth in a Panel of Countries', Journal of Economic Growth, 5 (2001), 87-120;
254. Dimitri Landa and Ethan B. Kapstein, 'Review Article: Inequality, Growth and Democracy', World Politics, 53 (2001), 264-96.
255. Chong and Gradstein, 'Inequality and Institutions'.
256. Campos and Root, The Key to the East Asian Miracle, p. 2.
257. On the geopolitics of the East Asian miracle, see Richard Stubbs, Rethinking Asia's Economic Miracle: The Political Economy of War, Prosperity, and Crisis (Basingstoke, Hants.: Palgrave Macmillan, 2005).
258. Knack, Democracy, Governance, & Growth, p. 7.
259. William H. Riker, Federalism (Boston, Mass.: Little Brown, 1964);
260. Boix, Democracy and Redistribution.
261. See, e.g., Robert O. Keohane and Helen V. Milner, Internationalization and Domestic Politics (Cambridge: Cambridge University Press, 1996);
262. Jeffrey Frieden and Lisa Martin, 'International Political Economy', in Katznelson and Milner, Political Science, pp. 118-46;
263. Joseph M. Grieco and G. John Ikenberry, State Power 1 World Markets: The International Political Economy (New York: Norton, 2003);
264. Miles Kahler and David A. Lake, Governance in a Global Economy (Princeton, N.J.: Princeton University Press, 2003);
265. David A. Lake, 'International Political Economy', in Weingast and Wittman, eds, The Oxford Handbook of Political Economy, pp. 757-77.
266. Quan Li and Rafael Reuveny, 'Economic Globalization and Democracy: An Empirical Analysis', British Journal of Political Science, 33 (2003), 29-54. (Pubitemid 36195321)
267. Wayne Sandholtz and Mark M. Gray, 'International Integration and National Corruption', International Organization, 57 (2003), 761-800.
268. Dani Rodrik, 'Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses', Journal of Economic Growth, 4 (1999), 385-412.
269. William Easterly, 'Can Foreign Aid Buy Growth?' Journal of Economic Perspectives, 17 (2003), 23-48;
270. Roger C. Riddell, Does Foreign Aid Really Work? (Oxford: Oxford University Press, 2007).
271. Some scholars even suggest that it is worth revisiting the merits of dependency theory. See Joe Foweraker and Todd Landman, 'Economic Development and Democracy Revisited: Why Dependency Theory is Not Yet Dead', Democratization, 11 (2004), 1-20;
272. Lake, 'International Political Economy'.
273. Suzanne Berger, 'Globalization and Politics', Annual Review of Political Science, 3 (2000), 43-62.
274. Shang-Jin Wei, 'Risks and Rewards of Embracing Globalization: The Governance Factor' (paper prepared for the Plenary Session of the AERC Meeting, 2000);
275. Ernesto Stein and Christian Daude, 'Institutions, Integrations and the Location of Foreign Direct Investment' (Washington, D.C.: Inter-American Development Bank, Research Department, mimeographed document, 2001).
276. Campos and Root, The Key to the East Asian Miracle, p. 78.
277. Campos and Root, The Key to the East Asian Miracle, p. 1.
278. On the contrasting distributional paths of Latin America and East Asia, see also Hilton L. Root, Capital and Collusion (Princeton, N.J.: Princeton University Press, 2006).
279. Rodrik, 'Where Did All the Growth Go?'
280. Hall and Soskice, Varieties of Capitalism.
281. North, Understanding the Process of Economic Change, p. 157.
282. James Gwartney, Robert Lawson and Randall Holcombe, 'Economic Freedom and the Environment for Economic Growth', Journal of Institutional and Theoretical Economics, 155 (1999), 643-63;
283. Wenbo Wu and Otto A. Davis, 'The Two Freedoms, Economic Growth and Development', Public Choice, 100 (1999), 39-64.
284. Karl Polanyi, The Great Transformation, 2nd edn (Boston, Mass.: Beacon Press, 2001), pp. 3-4, 79-80.
285. North, Understanding the Process of Economic Change, p. 78.
286. Helpman, The Mystery of Economic Growth, p. 140.
287. Kathleen Thelen, 'How Institutions Evolve', in James Mahoney and Dietrich Rueschemeyer, eds, Comparative Historical Analysis in the Social Sciences (Cambridge: Cambridge University Press, 2003), pp. 208-40, at p. 225.
288. For an approach to economic development as a process, see James M. Cypher and James L. Dietz, The Process of Economic Development (London: Routledge, 2004).
289. On the importance of placing institutional politics in time, see Paul Pierson, Politics in Time (Princeton, N.J.: Princeton University Press, 2004);
290. North, 'What Is Missing from Political Economy'.
291. North, Understanding the Process of Economic Change, p. 161.
292. For some frontier research on endogenous institutions, see Mantzavinos, Individuals, Institutions, and Markets;
293. Weingast, 'Rational-Choice Institutionalism';
294. Philippe Aghion, Alberto Alesina and Francesco Trebbi, 'Endogenous Political Institutions', Quarterly Journal of Economics, 119 (2004), 565-612;
295. Daron Acemoglu and James A. Robinson, Economic Origins of Dictatorship and Democracy (Cambridge: Cambridge University Press, 2006);
296. Avner Greif, Institutions and the Path to the Modern Economy (Cambridge: Cambridge University Press, 2006).
297. This crucial debate continues to divide the development community. See Rodrik, 'Goodbye Washington Consensus, Hello Washington Confusion?'
298. See R. Adcock and D. Collier, 'Measurement Validity: A Shared Standard for Qualitative and Quantitative Research', American Political Science Review, 95 (2001), 529-46;
299. Marcus J. Kurtz and Andrew Schrank, 'Growth and Governance: A Defense', Journal of Politics, 69 (2007), 563-9.
300. Helpman, The Mystery of Economic Growth, p. 141.
301. Bardhan, Scarcity, Conflicts, and Cooperation.
302. Context-specific analyses are also needed because processes of institutional formation might have 'multiple equilibria'. On the analytical gains of consciously-designed case studies, see Dietrich Rueschemeyer, 'Can One or A Few Cases Yield Theoretical Gains?' in Mahoney and Rueschemeyer, Comparative Historical Analysis in the Social Sciences, pp. 305-36;
303. Lee J. Alston, 'The Case for Case Studies in Political Economy', Political Economist, 12 (2005), 1-21;
304. Alexander L. George and Andrew Bennett, Case Studies and Theory Development in the Social Sciences (Cambridge, Mass.: MIT Press, 2005);
305. Andrew Bennett and Colin Elman, 'Recent Developments in Case Study Methods', Annual Review of Political Science, 9 (2006), 455-76;
306. John Gerring, Case Study Research (Cambridge: Cambridge University Press, 2007).
307. For insightful analytical cases studies on the politics of economic growth, see Rodrik, In Search of Prosperity.
308. On the promises of cross-method approaches, see Margaret Levi, 'An Analytic Narrative Approach to Puzzles and Problems', in Ian Shapiro, Rogers M. Smith and Tarek E. Masoud, eds, Problems and Methods in the Study of Politics (Cambridge: Cambridge University Press, 2004), pp. 201-26;
309. E. Lieberman, 'Nested Analysis as a Mixed Method Strategy for Comparative Research', American Political Science Review, 99 (2005), 435-52;
310. Andrew Bennett and Colin Elman, 'Qualitative Research: The View from the Subfields', Comparative Political Studies, 40 (2007), 111-21;
311. Jack S. Levy, 'Qualitative Methods and Cross-Method Dialogue in Political Science', Comparative Political Studies, 40 (2007), 196-214;
312. Detlef F. Sprinz and Yael Wolinsky-Nahmias, eds, Models, Numbers & Cases (Ann Arbor: University of Michigan Press, 2004).