Does Institutional Quality Matter for Financial Development and Growth? Further Evidence from MENA Countries

This study scrutinises the role of institutional quality in the linkage of financial development and economic growth in 21 Middle East and North African (MENA) countries. Using the common correlated effect mean pooled approach and annual data for the period 1980–2012, we find that not all measures of financial development promote economic growth in the absence of institutional quality, but they all augment growth in the presence of institutional quality. Furthermore, we find that foreign direct investment enhances the growth of MENA countries by the development of financial markets.     

Gender difference in support for Democracy in Sub-Saharan Africa: Do social institutions matter?

Several recent papers have noted gender differences in support for democracy in Africa, but the causes of this difference remain unclear. This article investigates whether the observed gender gap is due to the related gender inequality in social institutions, which affects women's daily life and deprives them of social and economic empowerment inside and outside the home. Using Afrobarometer survey data (rounds 2 [2002–3], 3 [2004–5], and 4 [2008–9]), the study finds that the gender difference in support for democracy is no longer significant once gender discrimination is controlled for in the family code, physical integrity, or civil liberties components of the Social Institutions and Gender Index (SIGI). Interaction terms show that women's support for democracy is only lower in places where gender inequality in these social institutions is particularly large. This study thus provides evidence that women who live in countries with favorable institutions toward women are more supportive of democracy than women who do not.     

Brazil and China: Two Routes of Economic Development?

We look at two emerging economies, Brazil and China, and propose an evaluation of their recent development in terms of growth performance and the evolution of income inequality. Our analysis, therefore, is related to the literature on their recent vast growth and also to the much debated Kuznets curve and theory. However, we claim that neither the growth nor the Kuznets approach capture recent relevant phenomena characterizing such countries' dynamics: namely, the presence of at least two distinct growth models. Cointegration analysis and empirical evidence seem to corroborate our interpretation. They also offer some further insights. We surmise that while contributing to press for a further re‐examination of convergence in the light of the issue of income distribution, such findings have interpretative relevance and policy implications for other less developed countries.     

Fewer Fish for Higher Profits? Price Response and Economic Incentives in Global Tuna Fisheries Management

This paper evaluates industry-wide economic incentives arising from changes in product prices in an industry exploiting a common renewable resource (tropical tunas) that is regulated via output limits. Changes in prices alter economic incentives by affecting revenues, profits, conservation, and nonmarket public benefits. Economic incentives in industries exploiting common resources have been examined from multiple angles. However, industry level variation in market prices arising from changes in public regulation has not been explored. We analyse the impact on economic incentives due to changes in output limits and market prices through estimation of ex-vessel price and scale flexibilities for imported skipjack and yellowfin in Thailand’s cannery market. The unitary scale flexibility, estimated from the General Synthetic Inverse Demand Systems, indicates no loss in revenue and even potential profit increases resulting from lower harvest levels that could arise from lower catch limits. However, for a revenue neutral or positive outcome to be achieved, the three inter-governmental tuna Regional Fisheries Management Organizations, which manage the majority of the yellowfin and skipjack tuna in the Pacific and Indian Oceans, would have to coordinate multilaterally to set the catch limits for both species.     

The effectiveness of aid on savings and investment in Sub-Saharan Africa: do volatility and institutional quality matter?

The effectiveness of aid is somewhat subject to its volatility. This study investigates the impact of aid volatility, especially on savings and investment, with a particular focus on the role of institutional quality in 45 Sub-Saharan African (SSA) countries over the period from 1990 to 2013. We used the Generalized Method of Moments (GMM) technique combined with a measure of volatility, namely an averaged data method involving six 4-year sub-periods. Our results suggest that while aid is positively associated with savings and investment, its volatility is harmful to savings and investment. However, when higher quality institutions exist, the volatility of aid has a less negative impact on savings and investment.

The policy implications are diverse; first, donors and SSA aid-dependent countries need to take into account the diversity of shocks to which aid can respond in mitigating its unpredictability. Secondly, SSA countries should be encouraged to establish the conditions for better quality institutions to mitigate the negative effects of the volatility of aid on macroeconomic aggregates such as savings and investment.     

Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?

This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa and determining whether this sustainability depends on the exchange rate regime. Relying on a formal theoretical framework and recent panel cointegration techniques, our findings show that current accounts have been globally sustainable in Sub-Saharan Africa countries over the 1980–2011 period. However, this sustainability has been lower for countries operating a fixed exchange rate regime or belonging to a monetary union. We also find that the difference in the level of sustainability could be explained by a higher persistence in the current account adjustment of countries operating under rigid exchange rate regimes.     

Three Decades After James Street’s “The Institutionalist Theory of Economic Development”: What Does Institutional Approach to Economic Development Mean Today?

James Street’s article, “The Institutionalist Theory of Economic Development,” (1987) is a masterpiece of institutionalist research on economic development. The thirty-year anniversary of its publishing is an invitation to review what the institutional approach to economic development means today. This article, therefore, aims to present a historical survey of works published in the Journal of Economic Issues (JEI) on economic development.     

Equity Markets and Economic Development: Does the Primary Market Matter?

This article examines the role played by primary and secondary equity markets in economic growth. It departs from standard literature to integrate both markets and to explicitly acknowledge the primary equity market. By employing a variety of dynamic panel estimators for 54 countries over the period 1995‐2010, we show that the primary equity market is not an important determinant of economic growth, although it facilitates the development of the secondary market. This study also confirms the importance of liquidity provided by the secondary market. The evidence here calls for further investigation into the capital‐raising function of equity markets.     

Do ICT Influence Economic Growth and Human Development in European Union Countries?

This study analyzes the influence of the introduction of Information and Communication Technologies (ICT) on economic growth and human development in the countries that make up the European Union 27. The remarkable interest that the European Commission has shown in the Information Society (IS) and the introduction of ICT inspired us to analyze to what extent ICT had established themselves in these countries. More specifically, countries are grouped in accordance with some of the main IS indicators published by Eurostat to ascertain whether or not there are different groups of countries with different levels of development and where ICT have been implemented to different degrees. We determine whether they have achieved different levels of economic and human development. This enables us to confirm (or reject) the main theories that suggest ICT have a strong influence on economic and human development. Results show the existence of four clearly distinct groups of countries which register significant differences.     

Institutions and the financial development–economic growth nexus in sub-Saharan Africa

Using a sample splitting approach that does not impose an exogenous quadratic term, we examine the effect of financial development on economic growth in sub-Saharan Africa by allowing the link to be mediated by the level of institutions. Our findings reveal a disproportionate growth-enhancing effect of finance, given countries’ distinct level of institutional quality. More specifically, when the International Country Risk Guide-based measure of institutions is used as the threshold variable, below the optimal level of institutional quality, financial development does not significantly promote economic growth. For countries with institutional quality above the threshold, higher finance is associated with growth. However, when institutions are measured by World Governance Indicators proxy, we find a significant effect of financial development, irrespective of whether a country is below or above the threshold. Interestingly, the growth-enhancing effect of finance is greater for low-institution countries relative to high-institution countries. Thus, through its ability to provide some crucial roles, the well-developed financial sector may also perform the function of sound institutions in influencing economic growth.     

Institutional stickiness of democracy in post-communist states: Can prevailing culture explain it?

Structural explanation of political development offers a finite set of factors that cause democracy to consolidate or not (Acemoglu and Robinson 2006). This approach is, however, insufficient to explain political development of post-communist countries because it ignores a role of social arrangements in democratic consolidation. The field of comparative political economy is becoming more acceptable to the idea that social institutions have significant impact on political development (Boettke et al. Review of Austrian Economics 18(3–4): 281–304, 2005). Using transitional experience of post-communist countries, I demonstrate that institutional stickiness of democracy depends on a combination of causal factors, including underlying political culture (Boettke et al. American Journal of Sociology and Economics 67(2), 2008; Pejovich The Review of Austrian Economics 16(4):347–361, 2003).     

Growth Miracle or Endangered Development? Vested Interests,Policy-Making,and Economic Development in the Dominican Republic

The Dominican Republic is often considered among the most successful developing countries, based primarily on its high and relatively sustained growth rates over the last two decades. On the other hand, indicators of human and social development, healthcare, and education have been particularly poor. I argue that the polarization of economic power plays an important role for this development. Furthermore, I analyze the structure of the Dominican economy in order to show that the country has relied on tourism, services, and special economic zones to obtain relatively high growth rates. These activities do not require high-skilled labor and will not allow the economy to generate high incomes for the population, but benefit a few families who control most conglomerates. In turn, this explains low investment in education and social spending, as well as low taxation rates.     

The Zhanjiang Economic and Technological Development Zone invites investment in the following projects:

1. A brief account of the Zhanjiang Sanfan Industrial Co. Ltd:The company was set up in November 1992. with a registered capital of RMB45 million yuan. Its main undertakings include real estate development and domestic and foreign trade.2. The Sanfan Haijing Residential Estate to be developed:The residential estate, which is eventually to cover 60 mu (15 mu to a hectare) lies in the center of Zhanjiang City, in an area already serviced by a complete range of public utilities and roads, while close to the sea. The first-phase implementation of the project calls for developing 6.3 mu of land, on which     

Do Institutional and Individual Investors Differ in Their Preference for Financial Skewness?

Employing a unique sample of individual and institutional investors, we conduct experiments to determine investors’ preference for (or indifference to) financial skewness. We present investors with a series of stocks with varying levels of skewness. Using Instant Response Devices, we then collect investors’ choices to hold or sell each stock. Among stocks with equal expected returns, we find strong evidence that the sample investors use a prospect theory utility function rather than a mean-variance expected utility function to decide to sell or hold stocks. In the loss domain, we find that investors are ambivalent about the choice between positively and negatively skewed stocks. However, in the gain domain, we find that both individual and institutional investors prefer negatively skewed stocks—a contrast from previous research suggesting that individuals (and not institutional investors) prefer positive skewness. We also find evidence suggesting that reference points are important in financial decision making.     

Consumer Boycotts: Does Trust in Law-Making and Law-Enforcing Institutions Matter?

This article estimates the effects of trust in political and judicial institutions on individuals’ propensity to take part in consumer boycotts. In particular, this study disentangles the effects of institutional trust and quality. The analysis relies on data from the 2010 European Social Survey, which is a path breaking comparative study of how justice is perceived and allows a valid measure of judicial and political trust to be constructed. A two-step instrumental variable method was used to measure the effects of institutional trust, controlling for micro- and macro- level factors. The results indicate that trust in law-making institutions is negatively associated with boycott participation, whereas the relationship between judicial trust in institutions and an individual’s likelihood to boycott is U-shaped. The findings are robust to the introduction of social capital and sociodemographic variables.     

What made Economists so Politically Influential? Governance-related Ideas and Institutional Entrepreneurship in the Economic Liberalisation of Israel and beyond

Liberal economists are known to be one of the driving forces behind economic liberalisation in various countries, but how did they become so politically influential? Constructivists generally suggest that during economic crises liberal economists persuaded decision-makers to adopt pro-market policy ideas as solutions for economic turbulence. While this answer is true, it is also only partial because it disregards the role played by governance-related ideas and institutional entrepreneurship in the political actions of liberal economists. I argue that ideas regarding decision-making mechanisms provided liberal economists with the basis for creatively exploiting pre-liberalisation institutions, such as central banks and central budget offices, through which these economists enhanced their long-term political influence. An in-depth examination of a paradigmatic case of economic liberalisation driven by liberal economists – Israel's Stabilisation Plan – exemplifies that argument. The existence of like-minded economists and similar pre-liberalisation policy-making institutions in many other countries hints that the Israeli experience is not unique.     

Did rainfall shocks cause civil conflict in Sub-Saharan Africa? The implications of data revisions

In their seminal paper, Miguel et al. (2004) found that negative rainfall shocks (measured as negative year-on-year rainfall growth) had caused civil conflict in sub-Saharan Africa over the 1981–1999 period. Since then, the rainfall and conflict data they used had undergone multiple revisions. We show that rainfall shocks are no longer statistically significant for civil conflict when the revised data are used. This is true whether we employ a different functional form for rainfall, extend the sample to include more recent observations, use longer lags for rainfall shocks, employ dynamic panel regression, or panel regressions that take into account of cross-sectional dependence. Using rainfall shocks as instruments for growth, we also find that growth is insignificant for civil conflict if the revised data are used. Upon further investigation, we find that updates in the rainfall and conflict data for one or a few countries may alone cause rainfall shocks to lose statistical significance.     

Different Situations, Different Economic Institutions ——-A Historical Perspective on China and India＇s Approaches to Development

Both being two developing countries with a vast territory, dense population, and centuries-old ancient civilization, China and India have many in common in natural resources, population size, historical condition, current economic issues, etc. except for regime. The competition between China and India is a typical one between economic institutions. This paper, by making a diachronic analysis on their courses of development, tries to justify the importance of adopting an economic institution suitable to the situation of a country.     

Core infrastructure and industrial performance in Africa: Do institutions matter?

The study investigates the role of institution in the nexus between core infrastructure and industrial performance in Africa. In this study, we select 25 African economies and data cover the period of 1996–2016. To conduct the panel analysis, we use variables such as manufacturing value added per capita to proxy industrial performance and employ the principal component analysis to generate core infrastructure index, as well as institution index. Using the fixed effect model, we find that core infrastructure has a positive but insignificant impact on industrial performance in the selected African countries. However, when we interact infrastructure with institution, results suggest that infrastructure has a positive and significant effect on industrial performance, alluding to the fact that institution is very important in making infrastructure to enhance industrial performance in Africa. Hence, African governments should formulate a sound industrial policy and standardise regulatory quality to boost industrial performance.