Hostname: page-component-7c8c6479df-r7xzm Total loading time: 0 Render date: 2024-03-28T13:05:54.080Z Has data issue: false hasContentIssue false

The impact of economic institutions on government policy: does contract-intensive economy promote impartial governance?

Published online by Cambridge University Press:  09 January 2023

Demet Yalcin Mousseau*
Affiliation:
School of Politics, Security, and International Affairs, University of Central Florida, Orlando, Florida, USA
*
Corresponding author. Email: Demet.Mousseau@ucf.edu

Abstract

The objective of this study is to show how contract-intensive economic institutions can promote diversity and inclusion of social and political groups in economic and business opportunities provided by governments. Building on the interdisciplinary political economy and governance literatures, two types of economic institutions are identified: rent-seeking and contract-intensive. It is argued that rent-seeking economic activities can reinforce in-group norms, gift-giving practices, and governments' discrimination of groups. However, when contract-intensive activities increase in an economy, they can enhance diversity and inclusion of groups in the marketplace creating opportunity structures outside the state and as businesses press governments toward greater impartiality. Analyses of 165 countries from 1961 to 2011 show that a one standard deviation increase in contract-intensive economic activity is associated with a substantial 18 percent increase in the equality of access to state business opportunities for both social and political groups in the long run.

Type
Research Article
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D. (2003), ‘Why not a Political Coase Theorem?’, Journal of Comparative Economics, 31(4): 620652.CrossRefGoogle Scholar
Acemoglu, D. and Robinson, J. (2012), Why Nations Fail? New York: Crown Publishing Group.Google Scholar
Alesina, A. and Ferrara, E. (2005), ‘Ethnic Diversity and Economic Performance’, Journal of Economic Literature, 43(3): 762800.CrossRefGoogle Scholar
Alesina, A., Baqir, A. and Easterly, W. (1999), ‘Public Goods and Ethnic Divisions’, Quarterly Journal of Economics, 114(4): 12431284.CrossRefGoogle Scholar
Ang, Y. Y. (2016), How China Escaped the Poverty Trap, Ithaca: Cornell University Press.CrossRefGoogle Scholar
Atlas Narodov Mira (1964), Glavnoe Upravlenie Geodezii i Kartografii, Moscow: Akademija Nauk.Google Scholar
Auerbach, A. (2016), ‘Clients and Communities: The Political Economy of Party Network Organization and Development in India's Urban Slums’, World Politics, 68(1): 111148.CrossRefGoogle Scholar
Bat, B. (2007), ‘Network Triads: Transitivity, Referral and Venture Capital Decisions in China and Russia’, Journal of International Business Studies, 38(6): 9981012.Google Scholar
Baylis, F. and Robert, J. (2004), ‘The Inevitability of Genetic Enhancement Technologies’, Bioethics, 18(1): 126.CrossRefGoogle ScholarPubMed
Beck, T. and Webb, I. (2003), ‘Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries’, The World Bank Economic Review, 17(1): 5188.CrossRefGoogle Scholar
Beck, T., Demirguc-Kunt, A. and Levine, R. (2010), ‘Financial Institutions and Markets across Countries and Over Time: The Updated Financial Development and Structure Database’, The World Bank Economic Review, 24(1): 7792.CrossRefGoogle Scholar
Benyishay, A. and Betancourt, R. R. (2010), ‘Civil Liberties and Economic Development’, Journal of Institutional Economics, 6(3): 281304.CrossRefGoogle Scholar
Berger, R., Barnes, B. R., Konwar, Z. and Singh, R. (2020), ‘Doing Business in India: The Role of Jaan-pehchaan’, Industrial Marketing Management, 89(July): 326339.CrossRefGoogle Scholar
Bluedorn, J. (2001), ‘Can Democracy Help? Growth and Ethnic Divisions’, Economics Letters, 70(1): 121126.CrossRefGoogle Scholar
Boef, S. D. and Keele, L. (2008), ‘Taking Time Seriously’, American Journal of Political Science, 52(1): 184200.CrossRefGoogle Scholar
Boehmer, C. and Daube, M. (2013), ‘The Curvilinear Effects of Economic Development on Domestic Terrorism’, Peace Economics, Peace Science, and Public Policy, 19(3): 359368.CrossRefGoogle Scholar
Bolt, J., Inklaar, R., Jong, H. and Zanden, J. L. (2018), Rebasing ‘Maddison’: New GDP per capita Comparisons and the Shape of Long-Run Economic Development. No GD-174, GGDC, Research Memorandum from Groningen Growth and Development Centre, Netherlands: University of Groningen. https://www.rug.nl/ggdc/html_publications/memorandum/gd174.pdf.Google Scholar
Bueno de Mesquita, B., Morrow, J. D., Siverson, R. M. and Smith, A. (1999), ‘An Institutional Explanation of the Democratic Peace’, American Political Science Review, 93(4): 791807.CrossRefGoogle Scholar
Cedrini, M. A., Ambrosino, A., Marchionatti, R. and Caille, A. (2020), ‘Mauss's the Gift, or the Necessity of an Institutional Perspective in Economics’, Journal of Institutional Economics, 16(5): 687701.CrossRefGoogle Scholar
Chabal, P. and Daloz, J.-P. (1999), Africa Works: Disorder as Political Instrument, Oxford, UK: James Currey for the International African Institute.Google Scholar
Charrad, M. M. and Adams, J. (2011), ‘Introduction: Patrimonialism, Past and Present’, The ANNALS of the American Academy of Political and Social Science, 636(1): 615.CrossRefGoogle Scholar
Clague, C., Keefer, P., Knack, S. and Olson, M. (1999), ‘Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance’, Journal of Economic Growth, 4(2): 185211.CrossRefGoogle Scholar
Coppedge, M. et al. (2019), V-dem [country-year/country-date] Dataset V9. Varieties of Democracy (V-Dem) Project, https://doi.org/10.23696/vdemcy19.CrossRefGoogle Scholar
Crone, M. (2017), ‘The Rise of Jihadi Militancy in Burkina Faso’, in Sheikh, M. K. (ed.), Expanding Jihad, Copenhagen, Denmark: Danish Institute for International Studies, pp. 2333.Google Scholar
Dolfsma, W., Eijk, R. and Jalink, A. (2009), ‘On a Source of Social Capital: Gift Exchange’, Journal of Business Ethics, 89(3): 315329.CrossRefGoogle Scholar
Easterly, W. (2001), ‘The Middle Class Consensus and Economic Development’, Journal of Economic Growth, 6(4): 317335.CrossRefGoogle Scholar
Easterly, W. and Levine, R. (1997), ‘Africa's Growth Tragedy: Policies and Ethnic Divisions’, The Quarterly Journal of Economics, 112(4): 12031250.CrossRefGoogle Scholar
Eisenstadt, S. N. and Roniger, L. (1980), ‘Patron-client Relations as a Model of Structuring Social Exchange’, Comparative Studies in Society and History, 22(1): 4277.CrossRefGoogle Scholar
Englebert, P. (1996), Burkina Faso: Unsteady Statehood in West Africa, New York: Routledge.Google Scholar
Enia, J. (2017), ‘Do Contracts Save Lives? The Relationship between Contract-Intensive Economies and Natural Disaster Fatalities’, Risk, Hazards & Crisis in Public Policy, 9(1): 6081.CrossRefGoogle Scholar
Enia, J. and James, P. (2015), ‘Regime Type, Peace, and Reciprocal Effects’, Social Science Quarterly, 96(2): 523539.CrossRefGoogle Scholar
Esman, M. and Herring, R. (2001), Carrots, Sticks, and Ethnic Conflict: Rethinking Development Assistance, Michigan: University of Michigan Press.CrossRefGoogle Scholar
Fernandez-Carro, R. and Lapuente, V. (2016), ‘The Emperor's Clothes and the Pied Piper: Bureaucracy and Scientific Productivity’, Science and Public Policy, 43(4): 546561.CrossRefGoogle Scholar
Ferraro, G. P. and Briody, E. K. (2017), The Cultural Dimension of Global Business (8th Edn), New York: Routledge.CrossRefGoogle Scholar
Freeman, J. R. (1983), ‘Granger Causality and the Time Series Analysis of Political Relationships’, American Journal of Political Science, 27(2): 327358.CrossRefGoogle Scholar
Heckelman, J. C. and Wilson, B. (2013), ‘Institutions, Lobbying, and Economic Performance’, Economics & Politics, 25(3): 360386.Google Scholar
Hegre, H., Bernhard, M. and Teorem, J. (2020), ‘Civil Society and the Democratic Peace’, Journal of Conflict Resolution, 64(1): 3262.CrossRefGoogle Scholar
Henrich, J. et al. (2005), ‘‘Economic Man’ in Cross-Cultural Perspective: Behavioral Experiments in 15 Small-Scale Societies’, Behavioral and Brain Sciences, 28(6): 795815.CrossRefGoogle ScholarPubMed
Heston, A., Summers, R. and Aten, B. (2012), Penn World Table Version 7.1. Center for International Comparisons of Production, GDP per capita and Prices, University of Pennsylvania. https://www.rug.nl/ggdc/productivity/pwt/pwt-releases/pwt-7.1?lang=en.Google Scholar
Hodgson, G. M. (2003), ‘The Hidden Persuaders: Institutions and Individuals in Economic Theory’, Cambridge Journal of Economics, 27(2): 159175.CrossRefGoogle Scholar
Hofstede, G. (1980), Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations, Delhi, India: Sage Publications.Google Scholar
International Crisis Group (2020), Burkina Faso: Stopping the Spiral of Violence. https://www.crisisgroup.org/africa/sahel/burkina-faso/287-burkina-faso-sortir-de-la-spirale-des-violences.Google Scholar
Kachelmeier, S. J. and Shehata, M. (1997), ‘Internal Auditing and Voluntary Co-Operation in Firms: A Cross-Cultural Experiment’, Accounting Review, 72(3): 407431.Google Scholar
Kimenyi, M. (2006), ‘Ethnicity, Governance and the Provision of Public Goods’, Journal of African Economies, 15(1): 6299.CrossRefGoogle Scholar
Kranton, R. (1996), ‘Reciprocal Exchange: A Self-Sustaining System’, American Economic Review, 86(4): 830851.Google Scholar
Krieger, T. and Meierrieks, D. (2015), ‘The Rise of Market-Capitalism and the Roots of Anti-American Terrorism’, Journal of Peace Research, 52(1): 4661.CrossRefGoogle Scholar
La Porta, R., Silanes, F., Shleifer, A. and Vishny, R. (1999), ‘The Quality of Government’, Journal of Law, Economics and Organization, 15(1): 222279.CrossRefGoogle Scholar
Larsen, M. T. (2015), Ancient Kanesh: A Merchant Colony in Bronze Age Anatolia, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Maine, H. S. (Sir). (1917 [1861]), Ancient Law: Its Connection to the History of Early Society, London, UK: J. M. Dent & Sons Ltd.Google Scholar
Malinowski, B. (1920), ‘Kula; the Circulating Exchange of Valuables in the Archipelagoes of Eastern New Guinea’, MAN, 20(July): 97105.CrossRefGoogle Scholar
Mauro, P. (1995), ‘Corruption and Economic Growth’, Journal of Comparative Economics, 29(1): 6679.Google Scholar
Mause, M. (1990 [1924]), The Gift: The Form and Reason for Exchange in Archaic Societies (Translated by Halls, W. D.), London, UK: Routledge.Google Scholar
McCannon, B. C., Asaad, C. T. and Wilson, M. (2018), ‘Contracts and Trust: Complements or Substitutes?’, Journal of Institutional Economics, 14(5): 811832.CrossRefGoogle Scholar
McCarthy, D., Puffer, J. M., Dunlap, D. R. and Jaeger, A. M. (2012), ‘A Stakeholder Approach to the Ethicality of Bric-Firm Managers’ Use of Favors’, Journal of Business Ethics, 109(1): 2738.CrossRefGoogle Scholar
Meierrieks, D. (2012), ‘Rooted in Urban Poverty? Failed Modernization and Terrorism’, Peace Economics, Peace Science, and Public Policy, 18(3): 19.CrossRefGoogle Scholar
Mousseau, M. (2009), ‘The Social Market Roots of Democratic Peace’, International Security, 33(4): 5286. http://dx.doi.org/10.1162/isec.2009.33.4.52.CrossRefGoogle Scholar
Mousseau, M. (2019), ‘The End of War: How a Robust Marketplace and Liberal Hegemony Are Leading to Perpetual World Peace’, International Security, 44(1): 160196. http://dx.doi.org/10.1162/isec_a_00352.CrossRefGoogle Scholar
Mousseau, D. Y. (2021), ‘Does Foreign Development Aid Trigger Ethnic War in Developing States?’, Armed Forces & Society, 47(4): 750769. http://dx.doi.org/10.1177/0095327X20902180.CrossRefGoogle Scholar
Mousseau, D. Y. and Mousseau, M. (2022), ‘The Economic Origins of Democratic Civil Liberties: A Cross-Country Analysis’, Journal of Human Rights, 119. http://dx.doi.org/10.1080/14754835.2022.2127311.CrossRefGoogle Scholar
Nelli, H. O. (1972), ‘The Earliest Insurance Contract: A New Discovery’, The Journal of Risk and Insurance, 39(2): 215220.CrossRefGoogle Scholar
Nevitte, N. and Kanji, M. (1999), ‘Orientations towards Authority and Congruency Theory’, International Journal of Comparative Sociology, 40(1): 161190.CrossRefGoogle Scholar
North, D. C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
North, D. C., Wallis, J. J. and Weingast, B. R. (2009), Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Olson, M. (1993), ‘Dictatorship, Democracy, and Development’, American Political Science Review, 87(3): 567576.CrossRefGoogle Scholar
Parry, J. (1986), ‘The Gift, the Indian Gift and the “Indian Gift”’, MAN, 21(3): 453473.CrossRefGoogle Scholar
Pemstein, D. et al. (2019), The V-Dem Measurement Model: Latent Variable Analysis for Cross-National and Cross-Temporal Expert-Coded Data. V-Dem Working Paper No. 21, 4th Edition, Varieties of Democracy Institute: University of Gothenburg.Google Scholar
Popper, K. R. (1945), The Open Society and Its Enemies, New Jersey: Princeton University Press.Google Scholar
Posen, B. (1993), ‘The Security Dilemma and Ethnic Conflict’, Survival, 35(1): 2747.CrossRefGoogle Scholar
Putnam, R. D. (2000), Bowling Alone: The Collapse and Revival of American Community, New York: Simon & Schuster Paperbacks.Google Scholar
Rothstein, B. and Teorell, J. (2008), ‘What is Quality of Government? A Theory of Impartial Government Institutions’, Governance, 21(2): 165190.CrossRefGoogle Scholar
Rothstein, B. and Uslaner, E. M. (2005), ‘All for One: Equality, Corruption, and Social Trust’, World Politics, 58(1): 4172.CrossRefGoogle Scholar
Rummel, R. J. (1983), ‘Libertarianism and International Violence’, Journal of Conflict Resolution, 27(1): 2771.CrossRefGoogle Scholar
Sherry, J. Jr. (1983), ‘Gift Giving in Anthropological Perspective’, Journal of Consumer Research, 10(2): 157168.CrossRefGoogle Scholar
Sigman, R and Lindberg, S. I. (2018), ‘Neopatrimonialism and Democracy: An Empirical Investigation of Africa's Political Regimes’, in Lynch, G. and Doepp, P. V. (eds.), Handbook of Democratization in Africa, London, UK: Routledge, pp. 125.Google Scholar
Simeon, N. and Peress, M. (2017), ‘Request Fulfilling: When Citizens Demand Clientelist Benefits’, Comparative Political Studies, 50(8): 10861117.Google Scholar
Singer, J. D., Bremer, S. and Stuckey, J. (1972), ‘Capability Distribution, Uncertainty, and Major Power War, 1820–1965’, in Russett, B. (ed.), Peace, War, and Numbers, California: Sage, pp. 1948.Google Scholar
Smith, D. (2003), ‘Patronage, Per Diems and the “Workshop Mentality”: The Practice of Family Planning Programs in Southeastern Nigeria’, World Development, 31(4): 703715.CrossRefGoogle Scholar
Smith, P. B., C. Torres, C. Leong, P. Budhwar, M. Achoui and N. Lebedeva (2012), ‘Are Indigenous Approaches to Achieving Influence in Business Organizations Distinctive? A Comparative Study of Guanxi, Wasta, Jeitinho, Svyazi and Pulling Strings’, The International Journal of Human Resource Management, 23(2): 333348.CrossRefGoogle Scholar
Stiglitz, J. E. (2012), The Price of Inequality: How Today's Divided Society Endangers our Future, New York: W. W. Norton & Company, Inc.Google Scholar
Treisman, D. (2000), ‘The Causes of Corruption: A Cross-National Study’, Journal of Public Economics, 76(3): 399457.CrossRefGoogle Scholar
Tullock, G. (1993), Rent Seeking, Vermont: Edward Elgar.Google Scholar
Weber, M. (1968 [1922]), Economy and Society (Translated and edited by Roth, G. and Wittich, C.), Berkeley: University of California Press.Google Scholar
Yuan, Y. (2014), Sensitivity Analysis in Multiple Imputation for Missing Data. Working Paper No. SAS270-2014, SAS Institute Inc. https://docplayer.net/20326757-Sensitivity-analysis-in-multiple-imputation-for-missing-data.html.Google Scholar