OECD DEVELOPMENT CENTRE

Working Paper No. 210

INSTITUTIONS AND DEVELOPMENT: A CRITICAL REVIEW

Johannes Jtting
Research programme on: Social Institutions and Dialogue

July 2003 DEV/DOC(2003)08

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TABLE OF CONTENTS

ACKNOWLEDGEMENTS .................................................................................................5 PREFACE .........................................................................................................................6 RSUM...........................................................................................................................7 SUMMARY........................................................................................................................ 8 I. INTRODUCTION............................................................................................................9 II. CLASSIFICATION OF INSTITUTIONS .......................................................................11 III. EMPIRICAL EVIDENCE OF THE IMPACT OF INSTITUTIONS ON DEVELOPMENT OUTCOMES ............................................................................15 IV. WHAT MAKES THE DIFFERENCE?.........................................................................29 V. A FRAMEWORK FOR ANALYSING THE IMPACT OF INSTITUTIONS ....................32 VI. CONCLUSIONS AND RESEARCH NEEDS ..............................................................35 NOTES............................................................................................................................37 BIBLIOGRAPHY .............................................................................................................38 OTHER TITLES IN THE SERIES/ AUTRES TITRES DANS LA SRIE..........................42

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ACKNOWLEDGEMENTS

The Development Centre would like to express its gratitude to the Swiss Authorities for the financial support given to the project which gave rise to this study. The author would like to thank Thomas Dannequin for excellent research assistance as well as participants in a seminar at the Development Centre who commented on an earlier version of the paper.

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PREFACE

It has been argued that institutions and institutional mechanisms for development provide the missing link that can explain differences in growth rates and development paths across developing and developed countries as well as the difficulties encountered in the transition process of the former socialist countries. Although there has been substantial progress in our understanding of institutions, the casual use of the term institution, combined with the lack of an analytical framework, has produced vague policy recommendations. Against this background, the author proposes an analytical framework that helps to detect the various links and channels running from institutions to development outcomes. This is a highly valuable tool for future analysis. To take research and understanding further, it will be important to address the questions of what makes a particular institutional arrangement work in one context and fail in another, and of how to overcome existing institutional bottlenecks. In particular, how can deeply-rooted rules, norms of behaviour and laws be combined with a more formal and modern institutional framework? Activity 3 of the Development Centres work programme 2003/04 on social institutions and dialogue deals with these issues, concentrating on the role of indigenous social institutions in development. These are of major importance for low-income countries, but still receive only marginal attention. As our knowledge is still limited on the actual economic and social impact of traditional social institutions, on the determinants of institutional change, and on policy options to induce institutional innovations in a low-income environment, the results of this activity will lead not only to an improvement of our knowledge, but also to highly relevant and hitherto elusive policy conclusions.

Prof. Louka T. Katseli Director OECD Development Centre 3 July 2003

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RSUM

Depuis quelques annes, le rle des institutions dans le dveloppement a t abondamment tudi par les chercheurs, les dcideurs et les praticiens du dveloppement. Ce Document technique fait le point des thories concernant limpact des institutions sur la croissance conomique et sur dautres aspects du dveloppement. La plupart des travaux font tat dune forte corrlation positive entre la qualit et les performances des institutions dune part, et les rsultats en matire de dveloppement dautre part. Toutefois, du fait de la diversit des mthodologies appliques et des problmes dordre conceptuel, le lien de causalit nest pas clairement tabli. Certaines lacunes ont t identifies. Pour y rpondre, ce Document propose un cadre analytique qui cartographie quelles sont les voies dinfluence des institutions sur le processus de dveloppement. Le cadre danalyse souligne que les institutions ne sont pas seules en cause mais quelles sinsrent dans une configuration locale influence par des volutions historiques et culturelles. Les analyses de limpact des institutions sur le niveau de dveloppement doivent tenir compte des diffrences entre les institutions exognes et endognes, la configuration locale, la perspective des acteurs conomiques et lexistence de diffrents niveaux dinstitutions avec des horizons temporels de changements variables. Ce dernier point est particulirement important pour les dcideurs dont lobjectif est de rformer le cadre des institutions dans leur pays. En effet, si lon peut agir sur les institutions endognes relativement court terme, changer des institutions exognes telles les rgles informelles, les normes sociales et les coutumes peut tre un processus beaucoup plus long, voire impossible. De fait, les dcideurs doivent sassurer que les rformes des politiques soient cohrentes avec les structures sociales existantes de la socit. Des travaux qui proposeraient des solutions visant amliorer le lien entre les structures sociales locales existantes et les cadres institutionnels formels tels que les structures de gouvernance non seulement enrichiraient un domaine encore mal explor mais ouvriraient aussi des perspectives davenir dune grande pertinence pour la mise en uvre des politiques.

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SUMMARY

In recent years, the role of institutions for development has received considerable attention from development researchers, policy makers and practitioners. This paper reviews the evidence on the impact of institutions on growth and other development outcomes. Most of the reviewed studies find a strong positive correlation between the quality and performance of institutions on the one hand and development outcomes on the other. However, due to various methodological approaches and conceptual problems, the evidence on causation is still thin. To address some of the identified weaknesses, the paper proposes an innovative analytical framework that maps out channels of influence between institutions and development outcomes. The developed framework stresses the idea that institutions do not stand alone but are embedded in a local setting influenced by historical trajectories and culture. Studies analysing the impact of institutions on development outcomes need to take into account the differences between exogenous and endogenous institutions, the local setting, the actor perspective and the existence of different levels of institutions with different time horizons of change. The last point is in particular relevant for policy makers aiming to reform the institutional set-ups of their countries. While endogenous institutions can be changed within a relative short time span, the change of exogenous institutions like informal rules, social norms, and customs might take a very long time or is even impossible. Hence, policy makers have to ensure that policy reforms have to be coherent with the existing social structures of the society. Research that finds solutions to improve the links between existing indigenous social structures and formal institutional set-ups such as governance structures would not only address a currently under researched area, but also promise to yield highly relevant policy results.

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I. INTRODUCTION

Over recent years, the role of institutions in economic development has received steadily increasing attention from researchers, policy makers and development practitioners1. Institutions are generally defined as constraints that human beings impose on themselves (North, 1990). Following this definition, institutions prohibit, permit or require specific type of action, i.e. political, economic or social, that are important for reducing transaction costs, for improving information flows and for defining and enforcing property rights. However, this definition does not have universal acceptance. Other scholars include in their definition of institutions organisational entities, procedural devices, and regulatory frameworks (Williamson, 2000). In most of the recent articles, institutions are defined in a broader sense, linking various different measures of institutional quality to development outcomes from various angles and disciplines. This paper addresses the important question of the impact of institutions on development outcomes2. Although a consensus that institutions matter has now emerged, the causality of the various links and channels of influence between the institutional set-up and development outcomes is not well understood. A thorough assessment of the impact of institutions is however necessary if one wants to evaluate alternative institutional arrangements against the status quo. This paper therefore reviews the existing literature on the impact of institutions on development outcomes with a view to setting out an analytical framework for future analysis. The main conclusion of this paper is that although recent years have witnessed a surge in the number of studies measuring the impact of institutions on development outcomes in particular growth many questions remain unsettled. In the paper, three important caveats are discussed: First, the literature has not settled on an overall accepted definition of institutions. Quite divergent definitions and concepts of institutions are given, ranging from the narrow definition proposed by Douglas North i.e. rules and norms that constrain human behaviour to definitions that include organisational entities. Some of the reviewed studies did not clearly spell out what they understood by institution, making judgement on their impacts rather difficult. Secondly, the reviewed studies often did not base their analysis on an analytical framework that mapped out the hypothesised channels of influence, thereby leading to various methodological problems. Development outcomes are not only influenced by the institutional set-up but also by other variables such as the local setting and the behaviour of human actors. Reverse causalities might therefore operate. Third, policy recommendations are often vague and based on strong assumptions about causalities. It would be desirable for future studies to pay more attention to the hierarchy level of the institution at stake and to the question of how institutions at different levels affect each 9

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other. The impact of social norms, values and traditions on the current governance structure and vice versa is one of the important questions for future research. Based on the review, an analytical framework of the literature is proposed that differentiates between exogenous and endogenous variables and highlights the diverse channels of influence from institutions to development outcomes. The remainder of this paper is organised as follows: In Section II, three different ways of classifying institutions are presented. Section III reviews empirical studies on the impact of institutions on development outcomes, differentiating between cross sectional and case studies. A major finding of the review the importance of high quality institutions is critically examined in Section IV. An analytical framework for analysing the impact of institutions is then developed in Section V. Conclusions and research needs are set out in Section VI.

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II. CLASSIFICATION OF INSTITUTIONS

In the literature there exist various ways of classifying institutions. They can be regrouped into three approaches depending on: the degree of formality; different levels of hierarchy; the area of analysis.

II.1. Degree of Formality Following North (1990), institutions include any form of constraint that human beings devise to shape human interaction. These constraints include both what individuals are prohibited from doing and, sometimes, under what conditions some individuals are permitted to undertake certain activities. In other words, they are the framework within which human interactions take place. Institutions consist of formal written rules as well as typically unwritten codes of conduct that underlie and supplement formal rules. Formal rules and constraints are made up of: constitutions, laws, property rights, charters, bylaws, statute and common law, and regulations; enforcement characteristics (sanctions, etc.). Arising to co-ordinate repeated human interaction, informal rules are: extensions, elaborations, and modifications of formal rules; socially sanctioned norms of behaviour (customs, taboos and traditions); internally enforced standards of conduct.

People in both rich and poor countries rely on informal institutions to facilitate transactions, but these institutions are relatively more important in poor countries where formal institutions are less developed. Moreover, poor people in developing countries are often ill-served by the limited formal institutions available. In poor countries, and poor regions in particular, informal institutions substitute for formal institutions. Countries and communities can go a long way towards resolving information and enforcement problems without using their formal public legal systems (World Bank, 2002).

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That the informal constraints are important can be observed from the evidence that the same formal rules and/or constitutions imposed on different societies produce different outcomes3. And discontinuous institutional change, such as revolution or military conquest and subjugation, produces new outcomes. But what is more striking is the persistence of so many aspects of a society in spite of a total change in the formal rules. Although formal rules may change overnight as the result of political or judicial decisions, informal constraints embodied in customs, traditions, and codes of conduct are much more impervious to deliberate policies (North, 1990). The informal and norm-based institutions that small community-based groups rely on tend to support a less diverse set of activities than do formal legal institutions. As countries develop, the number and range of partners that market participants deal with increases and market transactions become more complicated, demanding more formal institutions. Ideally, informal and formal institutions should complement each other. II.2. Different Levels of Hierarchy An alternative to a classification along the formality of institutions is offered by Williamson (2000). He proposes a classification scheme based on different hierarchical levels. The different levels of institutions presented in Table 1 are not exclusionary; rather they are interconnected. The higher level imposes constraints on the lower level, and feed-back exists from the lower level to the higher level.
Table 1. A Hierarchy Based Classification Scheme for Institutions
Level Examples Frequency of change Effect
2

Institutions related to the social structure of the society (level 1) Institutions related to rules of the game (level 2) Institutions related to the play of the game (level 3)

Mainly informal institutions such as traditions, social norms, customs. Exogenous Mainly formal rules defining property rights and the judiciary system. Exogenous or endogenous Rules defining the governance private structure of a country and contractual relationships, e.g. business contracts, ordering. Endogenous Rules related to resource allocation, e.g. capital flow controls; trade flow regimes; social security systems. Endogenous

Very long horizon (10 3 and 10 years) but may change also in times of shock/crisis. Long horizon (10 to 100 years). Mid-term horizon (1 to 10 years).

Defines the way a society conducts Itself. Defines the overall institutional environment. Leads to the building of organisations.

Institutions related to allocation mechanisms (level 4)

Short term horizon and continuous.

Adjustment to prices and outputs, incentive alignments.

Source: Authors presentation based on Williamson (2000).

Level 1 institutions are located at the social embeddedness level. Social norms, customs, traditions, etc. are located at this level. These traditional institutions often date back many centuries, are generally informal and can be regarded as exogenous to the economic system. This level is of utmost importance for people living in developing 12

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countries, where the other levels (IIIV) have only been partly established and/or do not function properly. Although institutions are in principle never static and could change in response to new economic opportunities or to crisis, the path of change on this level is rather slow or even non-existent. The purpose of these institutions is to define the way the society regulates itself. Most of the transactions undertaken are regulated by expectations, which in turn are based on beliefs and identities. Although no formal enforcement mechanism is in place the commitment to informal institutions is usually quite strong. The non-respect of certain values, traditions and norms can result in economic and social sanctions. Level 1 institutions exert a certain influence on the design of property rights (level 2 institution). If, as an overall norm in a society, a certain minimum income is guaranteed for every member, a collective organisation of property rights is more likely to prevail than a private market setting with free exchange. Level 2 institutions relate to the rules of the game. Their main purpose is to define and enforce property rights. Most of them are formal institutions like conventions or laws, but examples also exist of informal institutions, e.g. rules governing access to natural resources, that are not written down but are quite strongly binding and therefore fit under this umbrella. In contrast to the institutions described in level 1 the time horizon of a potential change is shorter. However it usually still takes between 10 and 100 years. Beside the rules of the game in the Williamson sense, the way the game is played is equally important. To define and enforce property rights, a legal system for defining contract laws and enforcing them is needed. Institutions that relate to governance are classified as Level 3 institutions. These institutions craft order and reshape incentives, thereby building the governance structure of a society and leading to the building of specific organisations like the local or national government, state agencies, NGOs, etc. The time frame for changing and reorganising transactions among governance structures is estimated to range from a few years to a decade. Though this level is influenced both by level 1 and 2, the various channels of feed-back loops and linkages are not yet clear. Finally, level 4 institutions define the extent to which adjustment occurs through prices or quantities, and determine the resource allocation mechanism. Examples of this type of institutions are rules that are easy to change and that have an impact on resource allocation, employment, the social security system, etc. This classification system helps to better understand institutional change and the impact of institutions on outcomes. If the interactions between institutions and development are analysed, the type of institutions, i.e. the level where a particular institution operates, will matter greatly. II.3. Area of Analysis Finally, a third alternative used in the literature to classify institutions is to differentiate between various areas of analysis. The four categories most commonly found in the literature are:

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economic institutions; political institutions; legal institutions; social institutions.

Under economic institutions, authors usually place rules that define the production, allocation and distribution process of goods and services, including markets (Bowles, 1998). Studies of political institutions usually employ variables that provide details about elections, electoral rules, type of political system, party composition of the opposition and the government, measures of checks and balances and political stability (Beck et al., 2002). Studies related to law and institutions refer to the type of legal system, the definition and enforcement of property rights and legal origin. Finally, studies on social institutions usually cover rules that have to do with access to health and education and social security arrangements, have an impact on gender balance and govern more generally the relationship between economic actors. Figure 1 summarises the different concepts used in defining and classifying institutions.
Figure 1. Different Ways of Classifying Institutions

Institutions

Formality
o Formal o Informal (traditional, indigenous)

Hierarchy
o Level 1 o Level 2 o Level 3 o Level 4

Areas
o Economic o Political o Law o Social

Having given an overview on the different definitions and concepts, the following chapter sets out the results of a detailed literature review on the impact of institutions on development outcomes.

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III. EMPIRICAL EVIDENCE OF THE IMPACT OF INSTITUTIONS ON DEVELOPMENT OUTCOMES

The following chapter is based on an extensive literature review looking at studies that deal with the impact of institutions on selected development outcomes. The review concentrates on development goals rather than on the means to achieve the goals. Hence, the emerging literature that looks at the effect of how political institutions and regimes affect economic policy (Persson and Tabellini, 2002; Milesi-Ferretti et al., 2002; Henisz, 2000; Beck et al., 2002; Tavares and Wacziarg, 1998) is not addressed here. The review identifies two different types of study: cross-sectional country studies mainly explaining differences in growth rates, government performance and corporate structures by invoking different institutional settings; and, country case studies analysing the effect of institutions in specific areas such as sustainable resource management, market development and conflict management. III.1. Cross-sectional Country Studies The question of how institutions and development outcomes, in particular growth, are interlinked and affect each other has recently become a hot topic in the international debate on development. A review of the cross-sectional studies shows that while there is a consensus in the literature that institutional quality matters for growth, the literature is quite ambiguous about the relative importance of institutions vis--vis other factors like geography and trade. Whereas the literature in the early 1990s used variables such as political violence and civil liberties to proxy for institutions, the more recent literature focuses on measures that capture institutional quality by referring to the risk of expropriation, degree of corruption, quality of bureaucracy and strength of the rule of law (Table 2).

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Table 2. Cross-sectional Studies of the Impact of Institutions on Development Outcomes

Author(s)/Year

Measures of institutions

Sachs (2003) GDP per capita The note aims to show that geography has a direct effect on growth without being channelled through institutions

Institutional index measuring institutional quality (no further details given)

1. Malaria transmission that is strongly affected by ecological conditions directly affects the level of per capital income after controlling for the quality of institutions. 2. The paper proposes to use a more complete model of development that go beyond simple specification test so far applied in the literature in order to better detect the complex interactions of institutions, policies and geography. 1. The results provide relatively more evidence for the adaptability channel than for the political channel. 2. The exogenous components of the indicators of legal system adaptability frequently explain cross-country differences in financial intermediary development, stock market development, and private property rights protection even when controlling for the political channel. 3. The exogenous component of the political channel does not explain cross-country variation in financial development. 4. German civil law and British common law have significantly better-developed financial intermediaries and markets and better property rights protection than French civil law countries, which is fully consistent with the adaptability channel. 1. Cross-country regressions of the log-level of per capita GDP on instrumented measure of trade and institutional quality are uninformative about the relative importance of trade and institutions in the long run, because of the very high correlation between the latter two variables. 2. In contrast, regressions of changes in decadal growth rates on instrumented changes in trade and changes in institutional quality provide evidence of a strong effect of trade on growth, with a much smaller role for improvements in institutions. 3. These results are suggestive of an important joint role for both trade and institutions in the very long run, but relatively larger role for trade over shorter horizons.

Beck et al. (2002) Financial development Through a historical comparisons and cross-country regressions, paper discusses and empirically assesses 2 theories of why legal origins matters for financial development: the political the adaptability channels. Paper examines the mechanisms via which legal origins operates.

Legal origins

Dollar & Kraay (2002) Trade and Growth Unbalanced panel of 274 observations on growth in the 1990s, 1980s and 1970s for roughly 100 countries. Estimation of cross-sectional regressions of growth in the very long run on institutions and trade: difficult to separately identify the effects of institutions and growth. Instead, uses a regression of growth on lagged growth, and on changes in the set of explanatory variables.

Institutional quality measured using an index of rule of law constructed by Kaufmann, Kray & Zoido-Lobaton, which uses a large number of available subjective measures of rule of law and protection of property rights and combine them into a composite indicator.

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Table 2. Cross-sectional Studies of the Impact of Institutions on Development Outcomes (continued)

Author(s)/Year

Measures of institutions

Rodrik et al. (2002) GDP per capita on a PPP basis Systematical estimation of a series of regressions in which incomes are related to measures of geography, integration into the trade system, and institutions, with the latter 2 instruments. Analysing the link between quality of institutions and ethnic diversity and its outcome on ethnic conflicts. 1. The quality of institutions trumps everything else, i.e. geography and trade. 2. Institutional quality has a positive and significant effect on integration.

Rating of institutional quality with respect to enforcement of property rights and the strength of the rule of law

Easterly (2001)

Institutional quality index

Outcome of ethnic conflicts

1. Institutional factors interact with ethnic diversity as they affect whether ethnic conflict is destructive or is contained by the rules of the game. 2. Ethnic diversity has a more adverse effect on economic policy and growth when institutions are poor. 3. Good institutions lower the risk of wars and genocides.

Aron (2000) GDP growth Literature review. Classification of the components of indicators of institutional measures in 5 categories: quality of formal institutions; measures of social capital; measures of social characteristics; characteristics of political institutions; measures of political instability. Use Rodriks (1999) two institutional dimensions as indices to measure the quality of conflict management institutions and test Rodriks assumption that institutions for conflict management are associated with the ability to react to economic shocks.

Quality of public and private economic institutions

Gaviria et al. (2000) Growth

Conflict management institutions.

1. Variables that capture the performance or quality of formal and informal institution are the appropriate institutional variables to include in investment and growth regressions 2. The quality of institutions has a robust and significant indirect relationship to growth via its effects on the volume of investment 3. The promotion of social capital strengthening informal institutions may positively influence growth both directly and indirectly. 4. Most of the studies fail on 2 accounts: they ignore simultaneity issues and often deal inadequately with endogenous institutional measures. 1. The indices used in the paper solve the endogeneity and subjectivity biases the affect Rodriks measure of institutional quality. 2. Paper finds strong support for the idea that high levels of political constraints and intermediate levels of political particularism are associated with a quick recovery from economic shocks.

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DEV/DOC(2003)08 Table 2. Cross-sectional Studies of the Impact of Institutions on Development Outcomes (continued)
Dependent variable Scope of the analysis Findings

Author(s)/Year

Measures of institutions

Campos & Nugent (1998) Growth 19 Latin American countries for the years 1960 to 1986. Incorporate the CIID measure into an otherwise standard Solow growth model, and then use that model to explain variations in growth rates.

Composite and comparative index of institutional b development (CIID)

1. The index is shown to contribute significantly to the explanation of the variations in growth rates of per capita income across countries and over time. 2. The central and common characteristic of relevant institutions is that they give agents a voice, a stake in the system. By doing so, they increase the appropriability of benefits or, conversely, reduce the amount of rent-seeking. 3. The results emphasise a nexus between institutional development and per capita income growth through human capital formation. 1. Data shows that using these measures of performance, the quality of governments varies systematically across countries. 2. Data shows that Government performance is surely in part determined by economic development, but it is also shaped by systematic variation in the histories of individual countries. 3. The results are difficult to interpret as supporting a particular version of political or cultural theories of institutions. Taken as a whole, however, results support the political results support the political theories of institutions, since ethnolinguistic heterogeneity and legal origin remain extremely important factors shaping government performance, even controlling for religion. 4. Identifying big government with bad government can be highly misleading. 1. Political violence and the Gastil political and civil liberties indicators are insufficient proxies for the quality of the institutions. 2. ICRG and BERI indices are both able to properly account for the influence of institutions. 3. Institutions that protect rights are crucial to economic growth and to investment. 4. When institutions are controlled for, stronger evidence emerges for conditional convergence.

La Porta et al. (1998) Government performance 1. Data set of measures of government performance and their potential determinants in (up to) 152 countries. Most data is from the 1990s. 2. Instruments of measurements are compiled for: government intervention, government efficiency, output of public goods, size of the public sector, democracy.

Institutions measured as security of property rights, quality of the bureaucracy, successful provision of essential public goods, effective spending, and democracy.

Knack & Keefer (1995)

Two indices (ICRG, a BERI) measuring institutional quality services.

Investment and economic growth

The study compares more direct measures of the institutional environment (ICRG and BERI indices) with both the instability proxies used by Barro (1991) and the Gastil indices.

Notes: a. The International Country Risk Guide (ICRG) variables used are expropriation risk, rule of law, repudiation of contracts by the government, corruption in government and quality of bureaucracy. The measures used from the Business Environmental Risk Intelligence (BERI) index are contract enforceability, infrastructure quality, nationalisation potential and bureaucratic delays. b. The CIID is made up of the 8 following variables: competitiveness of manner of generation of the executive authorities, openness of executive generation, constraints on chief executive, competitiveness of participation, regulation of participation, legislative effectiveness, legislative selection and scope of government actions.

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Our review of cross sectional studies with respect to the impact of institutions on development outcomes leads to the following conclusions: a wide similarity in defining institutions; stress on the importance of institutions for growth and development; disagreement on the relative importance of the various institutions; concerns about causalities, methods and channels of influence.

First, nearly all the quoted studies use as a proxy for institutions proxy variables and variables that measure the quality and performance of institutions rather than the institution itself. The strength of the rule of law, risk of expropriation and the security of property rights are mainly the outcome of the institutional set-up of the country. In the recent literature there is a tendency to prefer this kind of variable in growth regressions over variables that instead describe attributes of political institutions and society or measure political instability (Aron, 2000). Second, there is an overall acknowledgement that institutions matter and have a direct impact on growth. For example, Rodrik et al. (2002) found in a recent study that the estimated direct effect of institutions on incomes is positive and large (p. 11). Besides an observed direct impact, most studies also acknowledge an indirect impact on growth and economic development (Figure 2). Institutions can lead to an increase in investment, to a better management of ethnic diversity and conflicts, to better policies and to an increase in the social capital stock of a community. All these factors have a recognised positive influence on growth. Therefore, most of the studies suggest a strong and robust relationship between institutional quality and growth and development outcomes. Third, there is a disagreement and a continuous debate on the relative importance of institution in particular vis--vis trade and geography. There is an ongoing debate between a group of researchers headed by Dani Rodrik (Rodrik, 1999; Rodrik et al., 2002) and another centred around Jeffery Sachs (Sachs, 2003). Whereas the former stresses the dominant importance of institutions (trumps everything else), the latter puts geography as the most important factor explaining differences in growth rates (see Table 2 for details). Finally, Dollar and Kray (2002) put most emphasis on the role of being integrated into the trade system. Beside the dispute about the relative importance of institutions, the channels of influence are also controversially debated. The simultaneous relationship between growth, investment and institutions makes it difficult to find out the relative importance of the indirect and direct effect shown in Figure 2. Finally, most authors acknowledge the existing deficits of cross-sectional studies. The identified weaknesses relate to problems of definition, causalities and the proper interpretation of findings. In a very careful literature survey, Aron (2000, p. 100) reaches the conclusion that interpreting the evidence on growth using institutional measures is not a straightforward matter. In the following section the problems regarding cross-sectional studies are addressed in more detail.

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Figure 2. How Institutions Affect Growth

Institutions

Direct effect

Indirect effect

Investment n Integration/Trade n Stock of social capital n Political instability p Managing (ethnic) conflicts n Policies p n Income and Growth

III.2. Limitations and Deficits of Cross-country Studies The following three main difficulties in analysing the impact of institution in a cross-country setting can be singled out: i) ii) iii) indicators and channels of influence; data and methodology; interpretation and policy conclusion.

Problems with Indicators and Channels of Influence Most of the reviewed studies use as an independent variable an indicator for high quality institutions that consist of several different variables. There are three main problems related to this: First, there is no consensus what kind of variables ought to be included or left out. High quality institutions could entail the protection of property rights, low risk of expropriation, a well functioning judiciary system, political stability, a high stock of social capital, etc. or any mixture of these indicators. Hence, the aggregation of the indicator presents a problem as every element might influence income in a different manner. Secondly, there is the risk that the analysis becomes tautological when 20

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institutions are per definition of a high quality. The point here is that it is quite reasonable to expect that political stability positively contributes to growth, however the more interesting question is what kind of institutional arrangement lead to political stability. Third, institutional quality is often measured in terms of the perception and views of foreign investors and experts. These data are regularly collected and updated in the International Risk Country Guide (ICRG) and the Business Environmental Risk Index (BERI). This approach is probably very valuable for developed countries but not necessarily for developing countries as these evaluations focus mainly on aspects of formal institutions, whereas in most low-income countries informal institutions are of critical importance. One can have doubts on whether non-resident experts and investors have sufficient information to make a sound judgement on this subject4. Data and Methodological Problems Estimating the effect of institutions on growth in a cross country setting is plagued by several problems related to the availability and quality of data, measurement errors, possible omission of variables and reverse causality problems between regressors (Aron, 2000)5. This last problem is of particular importance. It relates to the discussion on whether institutions are exogenous or endogenous to the development process and on which way causalities run. Is growth and development the outcome of high quality institutions or are formal, modern and effective institutions the outcome of a prospering economy? In other words: Are improvements in property rights, contract enforceability, corruption, and political instability reduction, independent determinants of income or are they the result of higher incomes. Most of the experts on this subject agree: institutions are not exogenous to the development process. This has serious consequences for any estimation strategy. The difficult task that has to be tackled is that of finding a valid instrument for measuring institutional quality that is highly correlated with the usual measures but has no influence on our outcome variable, i.e. growth. In recent years, progress has been made in tackling the problems described. In this respect, an interesting paper is the study by Acemoglu et al. (2001), who exploit differences in European settler mortality rates to estimate the effect on institutions. They hypothesise that settler mortality was a driving force to explain actual settlements and the setting up of different kind of institutions. In areas where settler mortality rates were low, settlers tried to replicate European institutions with checks and balances, protected property rights, and the rule of law. Once these institutions had been set up they persisted even after independence. Countries such as Australia, New Zealand, Canada and the United States are examples of this. On the other hand, in countries with high mortality rates, the colonisation policy was different. The policy here was designed as to extract as much resources as possible without introducing the European institutional setting. The authors argue that also after independence there was a path dependency of this institutional set-up explaining the low quality and performance of todays institutions in poor countries.

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Problems Related to Interpretation and Policy Conclusions The existing studies have provided important insights concerning what actually explains differences in growth rates between countries. These findings are also very valuable for policy makers and provide general guidelines on how to change policies in order to achieve higher growth rates. The problem, however, is that the interpretation of findings often remains very vague, fairly general and difficult to interpret. If investors have confidence in the strength of the rule of law and in the protection of property rights in a country, then this may prove to be helpful for growth and the development process. But the far more pertinent question is: what concrete lessons can be drawn for policy makers from these types of analyses. Is it absolutely necessary that private property rights be enacted?6 Have rules got to be formally written down or can strong informal codes of conduct be sufficient? Is more participation of civil society in the political process always desirable, and if so, what are the conditions to achieve it? How can informal institutions be formalised? These and related questions are of core interest to the policy maker. Referring to these problems, Rodrik et al. (2002) stated that desirable institutional arrangements have a large element of context specificity, arising from differences in historical trajectories, geography and political economy or other initial conditions (p.24). They conclude that consequently, there is much to be learned still about what improving institutional quality means on the ground (p. 25). Following this line of argument, the International Monetary Fund (2003) admits that there is still little understanding of what specific institutional setting will work best in a specific local context. An indication that there is no blue print of an institutional design is the fact that countries with a similar level of income can have very different institutional settings. To sum up, cross-sectional analysis can give important insights on how institutions impact on development outcomes and vice-versa abstracting from the individual country case. However, there are of little value when it comes to specifying a reform agenda for any particular country. This is one of the lessons learned in the transformation process, where the value of legal institutions for economic success has long been valued, but the implementation of the right laws has proved to be very difficult7. III.3. Country Case Studies Studies analysing the impact of institutions in a developing country setting are grouped under three different topics: natural resource management, market development and conflict management (Table 3, 4 and 5). The following three points summarize the major findings of the review of the studies: definition of institution as the rules of the game, i.e. in the North sense; stress on the importance of informal institutions; desirability of linking formal with informal institutions.

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Table 3. Selected Studies on Institutions and Their Impact on Natural Resource Management
Involved actor(s) Location Resource covered Impact of institution (+): positive (-): negative

Author

Type of institution considered

Becker (2003) Non-profitorganisations; local stakeholders in forest conservation Ecuador Communityowned protected forest

Community system of self-governance: local institution representing the community, and collective tradition of decision-making Urban households; community organiser Ecuador Access to land

(+) rapid establishment of a community-owned protected forest due to the existence of local institutions (+) collective decision making process leads to consensus and support for a forest reserve (+) strong system of self-governance and communal tenure of land determined successful outcome (+) formal property rights can improve security and reduce transaction costs, (but depend on various conditions, e.g. access to other sources of ownership defined by informal rights) (+) define access to and use of water (+) establish and enforce rules for conflict resolution

Lanjouw and Levy (2002)

Formal property rights; informal rights in access to other resources Water users; well owners; dam chairman Zimbabwe Water management State and local government; landlords; farmers India Biodiversity conservation

Nemarunde and Kozanayi (2002)

Informal rules; social networks; kinship ties

Heltberg (2001)

Access and conservation rules

(+) promote private biomass production (+) reduce biomass dependency on the commons (+) improve forest outcomes (-) insufficient to safeguard forest and commons from continued degradation (+) networks provide the flexibility to choose from a repertoire of technologies with a positive effect on conservation (+) adapt successfully to environmental changes (+) available at low cost; (+) flexible (-) divergence between tenure institutions imposed by the State and informal institutions as a building block

Mazzucato and Niemeijer (2000) Government; farmers Burkina Faso Government; ethnic group Iban Malaysia

Social networks

Soil and water conservation

Cramb and Willis (1990)

Informal land tenure institutions; formal institutions set up by the state

Land tenure

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Table 4. Selected Studies on Institutions and Their Impact on Market Development

Author

Type of institution considered

Lohlein et al. (2003)

Informal institutions in risk sharing

Staff in the health care sector

Rural Russia

Access to health care

(+) minimum access to health care for everybody guaranteed (-) crowds out modernisation activities (-) Limited access to credit due to supply-side constraints (-) strong market segmenation (-) creation of a credit gap (?) linkage between formal and informal schemes desirable (+) allow markets to function (+) reduce transaction costs (+) contribute to risk reduction (-) risk of social exclusion (+) close, ethnic-based networks reduce transaction costs, leading to highly successful distribution systems (-) prevent flexibility (-) hinder growth of labour intensive industrialisation (+) rural social security networks has reduced fertility (-) the social security network is limited primarily to the higher-income rural communities and is not generally available in the rural areas

Atieno (2001)

Formal and informal institutions lending policies

Lending institutions; small-scale entreprises

Kenya

Credit

Jones et al. (2000) Saving groups Ghana Credit Local communities Trinidad Credit, land markets and basic infrastructure delivery

Informal credit and saving arrangements

Pamuk (2000)

Informal institutions influencing access to services and co-operation

Brautigam (1998) Nigeria Industrial development

Informal institutions based on the family/clan

Nnewi entrepreneurs, Asian business partners Labour force; unions; political parties India Formal labour laws and procedural norms

Chauduri (1996)

Labour market institutions

Johnson (1994)

Social security arrangements

Rural population; government

China

Fertility

Assaad (1993) Workers (in the construction sector)

Informal and formal institutions with an effect on urban labour markets

Egypt

Labour supply

(+) importance of informal institutions (-) no perfectly competitive labour market

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Table 5. Selected Studies on the Impact of Institutions on Conflict Management

Author

Type of institution considered

Khadiagala (2001)

Popular justice

Local councils

Uganda

Access to justice

(-) protection failure of womens customary property rights through use of informal community based institutions. (-) elites use informal institutions for social control. (+) private enforcement arrangements may substitute for missing public enforcement rules; the introduction of contractual arrangements between farms and a sugar processing company has led to an increase in market exchange and investments with potential spillover effects in other sectors. (+) use of social network for screening trading partners that makes relational contracts on informal basis possible. (-) ineffective formal laws. (-) legal reform should support existing institutions and legitimise current business practises. Otherwise risk of crowding out effects and welfare losses.

Gow et al. (2000) Sugar processing company; sugar supplying farms Slovakia Contract enforcement

Self-enforcing agreements

McMillan and Woodruff (1999)

Contracts to prevent disputes in business

Employee and employer

Vietnam

Contract agreements

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First, and in contrast to cross-sectional studies, institutions are more precisely defined and the term is mainly used in the North sense8. The types of institutions that the studies deal with ranges from informal access and conservation rules, to more formalised community systems and formal labour laws. Most of the reviewed studies look at a particular institution and its particular impact on development outcomes. Second, informal local institutions are not only explicitly taken into account but are found to be a key element in understanding the management of natural resources, market development and conflict management. In the area of natural resource management, informal institutions define the access to common goods and the rights of use. Most of the studies come to the conclusion that they are available at low cost and are quite flexible though one study pointed out that the rules of access and use defined by informal institutions might not prevent a continuing degradation of resources9. Interestingly, a similar finding can be reported in the studies looking at the development of credit markets. Here as well, informal institutions are of outstanding importance and in most cases have a positive effect on market development. They do so by contributing to lowering transaction costs and reducing risks, thereby making market transaction possible at all in an environment characterised by huge information asymmetries. However, the studies also point out that informal institutions and organisations can lead to social exclusion. This could be the case when local organisations are very homogenous and their membership is based on ethnic, gender, or religious attributes. Regarding conflict management, a study by Khadiagala (2001) found that contrary to the views of some scholars that local, informal, institutions are better adapted to provide justice to the poor and powerless, the author advocates a more realistic view of the laws enforced by the community. Referring to a case study of popular justice in Uganda, the author comes to the conclusion that popular justice has failed to protect the customary rights of women. The main reason for this failure is the elites ability to use traditional informal institutions for purpose of social control. In the surveyed area, characterised by land insecurity caused by male unemployment and high alcohol consumption, a prominent feature is the persistence of the reluctance among men to associate women with the notion of individual rights. This frequently leads to an abuse of power by the local councils. As a result, Khadiagala (2001) proposes to reconsider the relationship between legality and locality. She concludes that the national judiciary has some utility in local areas. A study by McMillan and Woodruff (2001) comes to a quite different conclusion regarding the role and impact of informal arrangements. They refer to a case study in Vietnam where the authors analyse how disputes are prevented or settled in a business sphere. In an institutional environment where potential trading partners can not resort to courts since formal laws are non-existent or not applied disputes are prevented by the threat of loss of future business. Furthermore, firms screen potential trading partners by relying on the information provided by their social networks. To ensure that agreements are kept, firms rely on several devices, including community sanctions, to supplement repeated-game incentives. In the case of a breach of a contract the noncomplying firm bears the risk of being blacklisted, thereby seriously threatening its ability to find new trading partners. The authors also point to the strain informal arrangements 26

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face during the process of market development, and to the raising demand for more formal procedures and institutions. A legal reform should nonetheless support existing institutions and legitimise current business practises. Otherwise, the risk exists that the formal institutions crowd out the still efficient informal ones, potentially causing welfare losses through diminishing the capacity to adapt rapidly to a changing economic environment and to technical change. Third, it is commonly accepted that formal and informal institutions should be seen as complementary. A case study on Nigeria demonstrates that the introduction of formal land property rights without taking into account the informal systems of rights attribution can bring negative results. The conclusion of this study clearly suggests that policy makers should make use of the informal institutions as a building block for introducing formal rules. In the process of a changing environment and external pressure on natural resources, formal institutions can help to enforce property rights. To combine the flexibility and low cost characteristics of the informal arrangements with the enforcement capacity of an external authority such as the state seems quite promising. In his book on Institutions, Social Norms and Development, Jean-Philippe Platteau (2002) comes to similar conclusions. Using the example of land tenure systems in Africa, he stresses the role of informal institutions and procedures. Whereas state intervention in land issues such as comprehensive land titling has proved to be fairly costly and often neglects distributional aspects, informal arrangements have three important advantages. First, they have lower transaction costs and are thereby relatively cheap and flexible compared to formal rules implemented by the state. Second, a fairly equal distribution, as a result of sticking to informal arrangements for land access, is an element of social security for the villagers in a generally insecure economic environment. Third, informal institutions in the area of resource management are widely recognised and accepted. III. 4. Limitations and Deficits of Country Case Studies In reviewing the studies, three major deficits in country case studies became apparent. First, although the term institution is in general more precisely defined than in cross-sectional studies in that it excludes, for example, organisational entities as part of the institutional framework, the particular focus of the analysis is not always clear. Analysing the impact of local institutions on natural resource conservation for instance could mean looking at local social networks, the community governance structure or at communal property rights. Studies sometimes lack at the outset a precise definition of institution as it is used in the researched context. A second observed deficit relates to the often missing conceptual framework. It is important to conduct an empirical analysis on the impact of institutions within an analytical framework that spells out which other variables influence the outcome and how they are postulated to interact with the variable institutions. Most of the studies lack or do not clearly spell out the kind of setting on which the analysis is based. This is a pity insofar as it undermines the credibility of the policy conclusions drawn by the authors. If a particular inefficiency in an institutional framework is identified by ignoring the local 27

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setting or the actor perspective, then a proposed change in the institutions might bring about no change in analysed outcome. Third and finally, most of the studies lack the perspective of how to bring about institutional change. This is especially true of the studies that find a negative impact of the institution under consideration. Whereas the question why an obviously inefficient system is maintained is addressed, ways to overcome it are seldom evoked.

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IV. WHAT MAKES THE DIFFERENCE?

The review and analysis of the literature discussing the impact of institutions on development outcomes has shown that the institutional environment can either promote development outcomes or be an obstacle to it. It also emerges that this depends not only on the quality of the institutional setting in itself but also on factors like the local setting or the interests and behaviour of the actors involved. It will be the task of future research to more thoroughly investigate the impact of institutions in a well defined setting and to address the question of institutional change. Beside this important task, the question remains of what actually makes the difference between high quality and successful institutions and those institutional arrangements that hamper development. The literature is still surprisingly silent on this issue. A few ideas on this are spelled out in the following. But deeper analysis is required in future research. Within a given institutional environment, outputs can be varying differently according to: Pressure on the Existing Institutional Set-up A change in the overall environment can turn former efficient institutions into costly and highly inefficient institutions. An example of this is the diminishing ability of informal institutions to regulate the access and use of commons under increasing outside pressure. Whereas informal institutions seem, to a certain extent, well-adapted to deal with the various problems of managing common property resources, in times of increasing market transactions, environmental hazards and population pressure, these institutions might no longer be able to avoid the overuse of the resource. A higher external enforcement agency is needed. A related example can be found in the area of risk management in rural areas of low income countries. A review of the literature by Jtting (2003) finds that informal risk sharing institutions based on reciprocity are often second best solutions in an environment characterised by uncertainty, high risks and high transaction costs. However, in cases of major shocks like widespread droughts, floods, epidemics, and macro-economic disturbances, i.e. when insurance is most needed, these systems tend to break down. Furthermore, profound changes in the mid- to long-run such as a changing demographic structure of the household, migration, and in general the modernisation of village life, can also have an impact on the institutional setting. Social

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ties and networks become generally weaker as economic exchanges become more commercial and impersonal (Morduch, 1999). The Matching of Informal and Formal Institutions In the development process, the demand for formal institutions increases due to an increasing complexity in transactions that can hardly be efficiently handled by informal institutions. However, this does not mean that informal institutions are becoming useless or losing importance. On the contrary, it is important that any change in the institutional environment takes into account, or even better is build or embedded in, the existing local institutions. This will help to reduce the creation of a parallel system that is usually highly ineffective and involves high costs. A recent study by Lohlein et al. (2003) on institutional change in the transformation process of rural Russia is enlightening in this respect. Strong informal institutions such as certain social norms and customs promote forms of reciprocity to the extent that health care workers stressed that they could not introduce informal charges as this would result in social stigmatisation and exclusion from social networks. The existence of these institutional arrangements has both positive and negative effects. On the one hand it guarantees a minimum access to health care for everyone, regardless of income. On the other hand, it crowds out initiatives to modernise and improve the quality of the health care system because it effectively sanctions the introduction of new forms of risk-sharing based on the principles of insurance. This leads to a situation in which, for cases of serious illness, people must go to better equipped hospitals in town, where money matters. Given these findings, the authors conclude that the challenge for policy makers will be to introduce or build a formal social insurance system that both reaches to the rural population and is compatible with the informal institutions providing social insurance. Jones et al. (2000) come to a broadly similar conclusion in their study of linkages between formal and informal financial intermediaries in Ghana. While informal financial institutions play an important role in giving the rural population access to credit and savings, their capacity is limited. By linking existing informal savings and credit arrangements with formal intermediaries, the latter can substantially increase the volume of small loans available to rural people in ways which are accessible, provide high repayment rates and are profitable. Degree of Path Dependency and Ability to Change According to North (1990), institutional change depends on changes in both relative prices and preferences. He also stresses the fact that once a development path is set on a particular course, the network externalities, the learning process of organisations, and the historically derived subjective modelling of the issues reinforce the course (North, 1990, p. 99). In other words, the high degree of path-dependency of a given institutional framework is an important factor in explaining persistent low growth rates in developing countries. He argues that an initial set of institutions that provide disincentives to productive activity will create organisations and interest groups with a stake in the existing constraints.

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A study by Mazzucato and Niemeijer (2002) on the role of local informal institutions in mediating over time the relationship between people and the environment finds that contrary to usual expectations, population growth has not led to a degradation of land resources. Based on a field study in the Sahelian and Sudano-Sahelian zones of Africa, the authors find a continuous process of institutional change caused by a multiplicity of factors. This change was mainly driven by market integration and, to a lesser extent, by population growth. Institutions have been changed to adjust to the changing external environment in four main domains: Reorganisation of the spatial production including a facilitation of land-borrowing agreements; extension and facilitation of access to labour; changing role of women; and diversification of livelihoods. According to the authors, these changes have allowed people to adapt to a changing context within which agriculture is practised, while not degrading their environment and that there can be processes of adjustment taking place through local institutions that positively affect the environment (p. 191).

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V. A FRAMEWORK FOR ANALYSING THE IMPACT OF INSTITUTIONS

Institutions and development outcomes are closely inter-linked and an increasing number of studies seek to understand this complex relationship. In most of the reviewed studies, the analysis concentrates on the linkage between institutional outcomes and development outcomes. In these types of studies, the specific local setting, the behaviour of human actors, and the endogeneity of an institution is not carefully taken into account, if at all. A framework that differentiates between exogenous and endogenous factors of influence is proposed for the analysis of the impact of an institution on development outcomes. It consists of five variables, one of them being exogenous, the rest endogenous (Figure 3). The first question to be answered is whether or not the institution of interest can be treated as exogenous or endogenous to the development outcome. As described earlier, most of the institutions at level 1 can be regarded as exogenous to the systems, i.e. they are independent from changes in the development outcome. If however, the institution is endogenous to the system, i.e. the outcome of interest can have an influence on the institutions under consideration, then this has serious implications for the estimation and analysis of a potential impact. Having clarified whether or not a particular institution should be regarded as endogenous or exogenous, the next step is to differentiate between the variable of interest a particular institution or institutional arrangement and other variables influencing the outcome. The local setting, e.g. geography (climate, soil conditions, illness incidence), can exert a direct influence on development outcomes as well as an indirect one vis--vis the endogenous institutional arrangements. An additional factor to be looked at is the specific economic, physical and technological characteristics of the good under consideration/outcome variable. The same institution might for instance have a different effect on a public good than on a private good. The specific characteristics have to be clarified in the analysis. Besides the local setting, the area of interaction has to be taken into account too. The institutional framework sends out incentives and disincentives for specific actions by human actors. Depending on the distribution of power and interest, actors undertake activities that determine the outcome. The framework presented stresses the idea that institutions do not stand alone but are embedded in a local setting influenced by historical trajectories and culture. It could be taken as a guideline for case studies dealing with the impact of institutions and institutional change.

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Figure 3: A Framework for Analysing the Impact of Institutions on Development Outcomes 1) Local Setting Geography Exogenous Institutions Characteristics of the good

Exogenous

2) Endogenous Institutions 3) Area of Interaction Incentives Disincentives Distribution of power Behaviour of actors Transaction Costs

4) Outcomes of Institutional Arrangements

5) Final Outcome Growth Degree of enforcement of property rights Strength of the stock of social capital Extent of political instability and corruption Investment

Endogenous

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The following points should be taken into account in studies analysing the impact of institutions on particular outcomes: need to differentiate between exogenous and endogenous institutions; existence of different levels of institutions with different time horizons of change; importance of the local setting; the specific characteristics (i.e. economic, technological and physical) of the good under consideration matter; need to seriously take into account the actor perspective. Human actors act as agents of institutional change or persistence.

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VI. CONCLUSIONS AND RESEARCH NEEDS

This study has reviewed the existing evidence on the link between institutions and development outcomes. In particular, it has addressed the question of the impact of institutions on selected outcome variables such as growth, natural resource conservation and market development. While there is an emerging amount of cross-sectional and country studies addressing these issues, the review identifies three important lacunae. First, in several of the reviewed studies, a clear concept of what institutions mean in this specific context is missing. The applied definition ranges from the narrow perspective of rules and norms to a far broader definition including aspects such as the political systems and organisations. Second, studies addressing the impact of institutions in a country case study setting often lack an analytical framework. This study proposes an analytical framework that differentiates between exogenous and endogenous variables and takes into account other variables also determining the outcome. Third, one finds in the existing literature a lack of studies offering precise policy recommendations. In particular, policy recommendations in cross-country growth studies are often rather blurred. With respect to future research needs, there is a remarkable gap in the literature related to questions of institutional change and of possibilities of policies inducing institutional innovations. The following three research areas are particularly promising to fill this identified gap: i) ii) iii) relationship and linkages between different levels of institutions; determinants of change of traditional institutions; policy options to improve the link between formal institutions and the indigenous social structure.

Whilst this literature review has shown that there is a substantial amount of evidence on the effect of institutions on development outcomes, there is only weak evidence of the relationship between different levels of institutions. A potentially interesting aspect is the question of crowding in and crowding out, i.e. if, and under what kind of circumstances, long lasting norms and traditions can crowd out a modernisation of the institutional framework. In addition, there is a need to evaluate the social and private costs and benefits of informal institutions. An interesting area to be looked at in a developing country context could be the possibilities of transforming informal risk sharing arrangements based on reciprocity into more formalised insurance schemes that would facilitate riskier but also more profitable investments. Secondly, although the question of institutional change is becoming increasingly popular10, it is still under researched. The persistence of exogenous institutions in a 35

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radically changing environment is not clear. Past experience in transition countries is a very pertinent example of how difficult it is to change institutions that have existed for centuries. To identify what factors drive institutional change is an emerging and challenging research question. Finally, it will be of great importance to formulate policies that help to better link formal and informal institutions. Given the fact that it might be very difficult, impossible, or not desirable to change the indigenous social structure, there is an urgent need to know more on under which conditions the different levels of institutions mapped out in Table 1 can be better linked. This could be important for various fields: the governance structure of a country, ways of participation in political decision making processes, ways of fighting social exclusion, etc. The challenge researchers will need to address is the trade-off between the need to zoom down to a specific case study scenario where one has the possibility of identifying otherwise neglected links and the wish to generalise findings beyond the particular context. To learn from successful examples requires a bench mark and reference points that guide the application of potential changes in different environments. In order to deal with this ambiguity, a comparative case study approach could be useful. Applying the above framework to two or more case studies could help derive policy conclusions that would go beyond the individual case study whilst remaining precise enough to formulate precise policy recommendations.

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NOTES

1. 2. 3.

Examples of recent articles on institutions and development can be found in Bardhan (2000); Rodrik et al. (2002); Pejovich (1999); Isham and Khknen (2002); Grootaert and Narayan (2001). Other studies like Bonaglia et al. (2001) look at the impact of policy outcomes like openness on the quality of domestic institutions. An illustrative example is the impact of central bank independence of inflation. While research has shown convincingly that the bank independence is negatively correlated with inflation rates in developed countries, this is not the case for developing countries. Fukasaku and Hellvin (1999) relate this finding to a larger divergence between theory and actual practice in implementing rules and regulations between developed and developing countries. An exception of this rule is the study by Knack and Keefer (1995) that examines the role of informal institutions using measures of trust and civic norms drawn from the World Value Surveys. For a survey see Temple (1999). The different experiences of China and Russia are interesting in this respect. Despite the fact that Russia has a formal legal system that is quite in line with European norms, which is not the case of China, Russia gets much lower rankings regarding its institutional quality for investment. On the contrary, China has retained its socialist legal systems without hindering the entrepreneurs feeling of security permitting large scale investments (Rodrik et al., 2002). Brunetti et al. (1997) explain differences in economic performance of transition countries with institutional indicators. Black et al., 1999 show that the idea of picking the right laws and thereby enhancing corporate governance has essentially failed in Russia. The quality of the institutions is not a priori defined as in most of the cross sectional studies. With her pathbreaking study on Governing the Commons, Ostrom (1990) has mapped out a theoretical approach explaining institutional choice in natural resource management. The next conference of the International Society for New Institutional Economics (ISNIE) in September 2003 will be exclusively devoted to this topic.

4. 5. 6.

7. 8. 9. 10.

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KHADIAGALA, L.S. (2001), The Failure of Popular Justice in Uganda: Local Councils and Womens Property Rights, Development and Change, Vol. 32, No. 1, pp. 55-76. LANJOUW, J.O. and P.I. LEVY (2002), Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador, The Economic Journal, Vol. 112, No. 482, pp. 986-1019. LA PORTA, R., F. LOPEZ-DE-SILANES, A. SHLEIFER and R. VISHNY (1998), The Quality of Government, Harvard Institute of Economic Research Working Papers 1847, Harvard Institute of Economic Research, Cambridge, MA. LOHLEIN, D., J. JTTING and P. W EHRHEIM (2003), Rural Russia in Transition: What Determines Access to Health-Care Services?, Post-Soviet Affairs, Vol. 19, No. 1 (in print). MAZZUCATO. V and D. NIEMEIJER (2002), Population Growth and the Environment in Africa: Local Informal Institutions, the Missing Link, Economic Geography, Vol. 78, No. 2, pp. 171-193. MAZZUCATO, V. and D. NIEMEIJER (2000), The Cultural Economy of Soil and Water Conservation: Market Principles and Social Networks in Eastern Burkina Faso, Development and Change, Vol. 31, No. 4, pp. 831-855. MCMILLAN, J. and C. W OODRUFF (1999), Dispute Prevention Without Courts in Vietnam, The Journal of Law, Economics, & Organization, Vol. 15, No. 3, pp. 637-658.
MILESI-FERRETTI,

G.M., R. PEROTTI and M. ROSTAGNO (2002), Electoral Systems and Public Spending, Quaterly Journal of Economics, Vol. 117, No. 2, pp. 609-657.

MORDUCH, J. (1999), Between the Market and State: Can Informal Insurance Patch the Safety Net?, mimeo prepared for Social Protection Unit, Human Development Network, World Bank, Washington, D.C. NEMARUNDE, N and W. KOZANAYI (2002), The Use of Informal Institutions and Social Networks to Access and Manage Water Resources in a Semi Arid Area in Zimbabwe, Ecological and Environmental Economics Program Working Paper, No. 2, The Beijer International Institute of Ecological Economics, Stockholm. NORTH, D.C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge University Press, Cambridge. OSTROM, E. (1990), Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge University Press, Cambridge. PAMUK, A. (2000), Informal Institutional Arrangements in Credit, Land Markets and Infrastructure Delivery in Trinidad, International Journal of Urban and Regional Research, Vol. 24, No. 2, pp. 379-396. PEJOVICH, S. (1999), The Effects of the Interaction of Formal and Informal Institutions on Social Stability and Economic Development, Journal of Markets and Morality, Vol. 2, No. 2, pp. 164-181. PERSSON, T. and G. TABELLINI (2002), Economic Policy in Representative Democracies, MIT Press, Cambridge, forthcoming. PLATTEAU, J.-P. (2000), Institutions, Social Norms, and Economic Development, Harwood Academic Publishers, Amsterdam. RODRICK, D. (1999), Institutions for High Quality Growth: What They Are and How They Affect Growth, Paper prepared for the International Monetary Fund Conference on Second-Generation Reforms, Washington, D.C., 8-9 November 1999. RODRIK, D, A. SUBRAMANIAN and F. TREBBI (2002), Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development, IMF Working Paper, WP/02/189, International Monetary Fund, Washington, D.C.

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SACHS, J. (2003), Institutions Dont Rule: Direct Effects of Geography on Per Capita Income, NBER Working Paper, No. w9490, February. TAVARES, J. and R. W ACZIARG (1998), How Democracy Affects Growth, European Economic Review, Vol. 45, No. 8, pp. 1341-1379. TEMPLE, J. (1999), The New Growth Evidence, Journal of economic Literature, Vol. 37, No. 1, pp. 112-156. W ILLIAMSON, O.E. (2000), The New Institutional Economics: Taking Stock, Looking Ahead, The Journal of Economic Literature, Vol. 38, No. 3, pp. 595-613. W ORLD BANK (2002), World Development Report 2002: Building Institutions for Markets, Oxford University Press, Oxford.

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OTHER TITLES IN THE SERIES/ AUTRES TITRES DANS LA SRIE

All these documents may be downloaded from: [Link] obtained via e-mail ([Link]@[Link]) or ordered by post from the address on page 3
Technical Paper No.1, Macroeconomic Adjustment and Income Distribution: A Macro-Micro Simulation Model, by Franois Bourguignon, William H. Branson and Jaime de Melo, March 1989. Technical Paper No. 2, International Interactions in Food and Agricultural Policies: The Effect of Alternative Policies, by Joachim Zietz and Alberto Valds, April, 1989. Technical Paper No. 3, The Impact of Budget Retrenchment on Income Distribution in Indonesia: A Social Accounting Matrix Application, by Steven Keuning and Erik Thorbecke, June 1989. Technical Paper No. 3a, Statistical Annex: The Impact of Budget Retrenchment, June 1989. Document technique No. 4, Le Rquilibrage entre le secteur public et le secteur priv : le cas du Mexique, par C.-A. Michalet, juin 1989. Technical Paper No. 5, Rebalancing the Public and Private Sectors: The Case of Malaysia, by R. Leeds, July 1989. Technical Paper No. 6, Efficiency, Welfare Effects, and Political Feasibility of Alternative Antipoverty and Adjustment Programs, by Alain de Janvry and Elisabeth Sadoulet, January 1990. Document technique No. 7, Ajustement et distribution des revenus : application dun modle macro-micro au Maroc, par Christian Morrisson, avec la collaboration de Sylvie Lambert et Akiko Suwa, dcembre 1989. Technical Paper No. 8, Emerging Maize Biotechnologies and their Potential Impact, by W. Burt Sundquist, October 1989. Document technique No. 9, Analyse des variables socio-culturelles et de lajustement en Cte dIvoire, par W. Weekes-Vagliani, janvier 1990. Technical Paper No. 10, A Financial Computable General Equilibrium Model for the Analysis of Ecuadors Stabilization Programs, by Andr Fargeix and Elisabeth Sadoulet, February 1990. Technical Paper No. 11, Macroeconomic Aspects, Foreign Flows and Domestic Savings Performance in Developing Countries: A State of The Art Report, by Anand Chandavarkar, February 1990. Technical Paper No. 12, Tax Revenue Implications of the Real Exchange Rate: Econometric Evidence from Korea and Mexico, by Viriginia Fierro and Helmut Reisen, February 1990. Technical Paper No. 13, Agricultural Growth and Economic Development: The Case of Pakistan, by Naved Hamid and Wouter Tims, April 1990. Technical Paper No. 14, Rebalancing the Public and Private Sectors in Developing Countries: The Case of Ghana, by H. Akuoko-Frimpong, June 1990. Technical Paper No. 15, Agriculture and the Economic Cycle: An Economic and Econometric Analysis with Special Reference to Brazil, by Florence Contr and Ian Goldin, June 1990. Technical Paper No. 16, Comparative Advantage: Theory and Application to Developing Country Agriculture, by Ian Goldin, June 1990. Technical Paper No. 17, Biotechnology and Developing Country Agriculture: Maize in Brazil, by Bernardo Sorj and John Wilkinson, June 1990. Technical Paper No. 18, Economic Policies and Sectoral Growth: Argentina 1913-1984, by Yair Mundlak, Domingo Cavallo, Roberto Domenech, June 1990. Technical Paper No. 19, Biotechnology and Developing Country Agriculture: Maize In Mexico, by Jaime A. Matus Gardea, Arturo Puente Gonzalez and Cristina Lopez Peralta, June 1990. Technical Paper No. 20, Biotechnology and Developing Country Agriculture: Maize in Thailand, by Suthad Setboonsarng, July 1990. Technical Paper No. 21, International Comparisons of Efficiency in Agricultural Production, by Guillermo Flichmann, July 1990. Technical Paper No. 22, Unemployment in Developing Countries: New Light on an Old Problem, by David Turnham and Denizhan Ercal, July 1990. Technical Paper No. 23, Optimal Currency Composition of Foreign Debt: the Case of Five Developing Countries, by Pier Giorgio Gawronski, August 1990. Technical Paper No. 24, From Globalization to Regionalization: the Mexican Case, by Wilson Peres Nez, August 1990. Technical Paper No. 25, Electronics and Development in Venezuela: A User-Oriented Strategy and its Policy Implications, by Carlota Perez, October 1990.

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Technical Paper No. 26, The Legal Protection of Software: Implications for Latecomer Strategies in Newly Industrialising Economies (NIEs) and Middle-Income Economies (MIEs), by Carlos Maria Correa, October 1990. Technical Paper No. 27, Specialization, Technical Change and Competitiveness in the Brazilian Electronics Industry, by Claudio R. Frischtak, October 1990. Technical Paper No. 28, Internationalization Strategies of Japanese Electronics Companies: Implications for Asian Newly Industrializing Economies (NIEs), by Bundo Yamada, October 1990. Technical Paper No. 29, The Status and an Evaluation of the Electronics Industry in Taiwan, by Gee San, October 1990. Technical Paper No. 30, The Indian Electronics Industry: Current Status, Perspectives and Policy Options, by Ghayur Alam, October 1990. Technical Paper No. 31, Comparative Advantage in Agriculture in Ghana, by James Pickett and E. Shaeeldin, October 1990. Technical Paper No. 32, Debt Overhang, Liquidity Constraints and Adjustment Incentives, by Bert Hofman and Helmut Reisen, October 1990. Technical Paper No. 34, Biotechnology and Developing Country Agriculture: Maize in Indonesia, by Hidjat Nataatmadja et al., January 1991. Technical Paper No. 35, Changing Comparative Advantage in Thai Agriculture, by Ammar Siamwalla, Suthad Setboonsarng and Prasong Werakarnjanapongs, March 1991. Technical Paper No. 36, Capital Flows and the External Financing of Turkeys Imports, by Ziya nis and Sleyman zmucur, July 1991. Technical Paper No. 37, The External Financing of Indonesias Imports, by Glenn P. Jenkins and Henry B.F. Lim, July 1991. Technical Paper No. 38, Long-term Capital Reflow under Macroeconomic Stabilization in Latin America, by Beatriz Armendariz de Aghion, April 1991. Technical Paper No. 39, Buybacks of LDC Debt and the Scope for Forgiveness, by Beatriz Armendariz de Aghion, April 1991. Technical Paper No. 40, Measuring and Modelling Non-Tariff Distortions with Special Reference to Trade in Agricultural Commodities, by Peter J. Lloyd, July 1991. Technical Paper No. 41, The Changing Nature of IMF Conditionality, by Jacques J. Polak, August 1991. Technical Paper No. 42, Time-Varying Estimates on the Openness of the Capital Account in Korea and Taiwan, by Helmut Reisen and Hlne Yches, August 1991. Technical Paper No. 43, Toward a Concept of Development Agreements, by F. Gerard Adams, August 1991. Document technique No. 44, Le Partage du fardeau entre les cranciers de pays dbiteurs dfaillants, par Jean-Claude Berthlemy et Ann Vourch, septembre 1991. Technical Paper No. 45, The External Financing of Thailands Imports, by Supote Chunanunthathum, October 1991. Technical Paper No. 46, The External Financing of Brazilian Imports, by Enrico Colombatto, with Elisa Luciano, Luca Gargiulo, Pietro Garibaldi and Giuseppe Russo, October 1991. Technical Paper No. 47, Scenarios for the World Trading System and their Implications for Developing Countries, by Robert Z. Lawrence, November 1991. Technical Paper No. 48, Trade Policies in a Global Context: Technical Specifications of the Rural/Urban-North/South (RUNS) Applied General Equilibrium Model, by Jean-Marc Burniaux and Dominique van der Mensbrugghe, November 1991. Technical Paper No. 49, Macro-Micro Linkages: Structural Adjustment and Fertilizer Policy in Sub-Saharan Africa, by Jean-Marc Fontaine with the collaboration of Alice Sindzingre, December 1991. Technical Paper No. 50, Aggregation by Industry in General Equilibrium Models with International Trade, by Peter J. Lloyd, December 1991. Technical Paper No. 51, Policy and Entrepreneurial Responses to the Montreal Protocol: Some Evidence from the Dynamic Asian Economies, by David C. OConnor, December 1991. Technical Paper No. 52, On the Pricing of LDC Debt: an Analysis Based on Historical Evidence from Latin America, by Beatriz Armendariz de Aghion, February 1992. Technical Paper No. 53, Economic Regionalisation and Intra-Industry Trade: Pacific-Asian Perspectives, by Kiichiro Fukasaku, February 1992. Technical Paper No. 54, Debt Conversions in Yugoslavia, by Mojmir Mrak, February 1992. Technical Paper No. 55, Evaluation of Nigerias Debt-Relief Experience (1985-1990), by N.E. Ogbe, March 1992. Document technique No. 56, LExprience de lallgement de la dette du Mali, par Jean-Claude Berthlemy, fvrier 1992. Technical Paper No. 57, Conflict or Indifference: US Multinationals in a World of Regional Trading Blocs, by Louis T. Wells, Jr., March 1992. Technical Paper No. 58, Japans Rapidly Emerging Strategy Toward Asia, by Edward J. Lincoln, April 1992. Technical Paper No. 59, The Political Economy of Stabilization Programmes in Developing Countries, by Bruno S. Frey and Reiner Eichenberger, April 1992. Technical Paper No. 60, Some Implications of Europe 1992 for Developing Countries, by Sheila Page, April 1992. Technical Paper No. 61, Taiwanese Corporations in Globalisation and Regionalisation, by Gee San, April 1992. Technical Paper No. 62, Lessons from the Family Planning Experience for Community-Based Environmental Education, by Winifred Weekes-Vagliani, April 1992. Technical Paper No. 63, Mexican Agriculture in the Free Trade Agreement: Transition Problems in Economic Reform, by Santiago Levy and Sweder van Wijnbergen, May 1992. Technical Paper No. 64, Offensive and Defensive Responses by European Multinationals to a World of Trade Blocs, by John M. Stopford, May 1992. Technical Paper No. 65, Economic Integration in the Pacific Region, by Richard Drobnick, May 1992. Technical Paper No. 66, Latin America in a Changing Global Environment, by Winston Fritsch, May 1992. Technical Paper No. 67, An Assessment of the Brady Plan Agreements, by Jean-Claude Berthlemy and Robert Lensink, May 1992. Technical Paper No. 68, The Impact of Economic Reform on the Performance of the Seed Sector in Eastern and Southern Africa, by Elizabeth Cromwell, June 1992. Technical Paper No. 69, Impact of Structural Adjustment and Adoption of Technology on Competitiveness of Major Cocoa Producing Countries, by Emily M. Bloomfield and R. Antony Lass, June 1992. Technical Paper No. 70, Structural Adjustment and Moroccan Agriculture: an Assessment of the Reforms in the Sugar and Cereal Sectors, by Jonathan Kydd and Sophie Thoyer, June 1992.

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Document technique No. 71, LAllgement de la dette au Club de Paris : les volutions rcentes en perspective, par Ann Vourch, juin 1992. Technical Paper No. 72, Biotechnology and the Changing Public/Private Sector Balance: Developments in Rice and Cocoa, by Carliene Brenner, July 1992. Technical Paper No. 73, Namibian Agriculture: Policies and Prospects, by Walter Elkan, Peter Amutenya, Jochbeth Andima, Robin Sherbourne and Eline van der Linden, July 1992. Technical Paper No. 74, Agriculture and the Policy Environment: Zambia and Zimbabwe, by Doris J. Jansen and Andrew Rukovo, July 1992. Technical Paper No. 75, Agricultural Productivity and Economic Policies: Concepts and Measurements, by Yair Mundlak, August 1992. Technical Paper No. 76, Structural Adjustment and the Institutional Dimensions of Agricultural Research and Development in Brazil: Soybeans, Wheat and Sugar Cane, by John Wilkinson and Bernardo Sorj, August 1992. Technical Paper No. 77, The Impact of Laws and Regulations on Micro and Small Enterprises in Niger and Swaziland, by Isabelle Joumard, Carl Liedholm and Donald Mead, September 1992. Technical Paper No. 78, Co-Financing Transactions between Multilateral Institutions and International Banks, by Michel Bouchet and Amit Ghose, October 1992. Document technique No. 79, Allgement de la dette et croissance : le cas mexicain, par Jean-Claude Berthlemy et Ann Vourch, octobre 1992. Document technique No. 80, Le Secteur informel en Tunisie : cadre rglementaire et pratique courante, par Abderrahman Ben Zakour et Farouk Kria, novembre 1992. Technical Paper No. 81, Small-Scale Industries and Institutional Framework in Thailand, by Naruemol Bunjongjit and Xavier Oudin, November 1992. Technical Paper No. 81a, Statistical Annex: Small-Scale Industries and Institutional Framework in Thailand, by Naruemol Bunjongjit and Xavier Oudin, November 1992. Document technique No. 82, LExprience de lallgement de la dette du Niger, par Ann Vourch et Maina Boukar Moussa, novembre 1992. Technical Paper No. 83, Stabilization and Structural Adjustment in Indonesia: an Intertemporal General Equilibrium Analysis, by David Roland-Holst, November 1992. Technical Paper No. 84, Striving for International Competitiveness: Lessons from Electronics for Developing Countries, by Jan Maarten de Vet, March 1993. Document technique No. 85, Micro-entreprises et cadre institutionnel en Algrie, par Hocine Benissad, mars 1993. Technical Paper No. 86, Informal Sector and Regulations in Ecuador and Jamaica, by Emilio Klein and Victor E. Tokman, August 1993. Technical Paper No. 87, Alternative Explanations of the Trade-Output Correlation in the East Asian Economies, by Colin I. Bradford Jr. and Naomi Chakwin, August 1993. Document technique No. 88, La Faisabilit politique de lajustement dans les pays africains, par Christian Morrisson, Jean-Dominique Lafay et Sbastien Dessus, novembre 1993. Technical Paper No. 89, China as a Leading Pacific Economy, by Kiichiro Fukasaku and Mingyuan Wu, November 1993. Technical Paper No. 90, A Detailed Input-Output Table for Morocco, 1990, by Maurizio Bussolo and David Roland-Holst November 1993. Technical Paper No. 91, International Trade and the Transfer of Environmental Costs and Benefits, by Hiro Lee and David Roland-Holst, December 1993. Technical Paper No. 92, Economic Instruments in Environmental Policy: Lessons from the OECD Experience and their Relevance to Developing Economies, by Jean-Philippe Barde, January 1994. Technical Paper No. 93, What Can Developing Countries Learn from OECD Labour Market Programmes and Policies?, by sa Sohlman with David Turnham, January 1994. Technical Paper No. 94, Trade Liberalization and Employment Linkages in the Pacific Basin, by Hiro Lee and David Roland-Holst, February 1994. Technical Paper No. 95, Participatory Development and Gender: Articulating Concepts and Cases, by Winifred Weekes-Vagliani, February 1994. Document technique No. 96, Promouvoir la matrise locale et rgionale du dveloppement : une dmarche participative Madagascar, par Philippe de Rham et Bernard Lecomte, juin 1994. Technical Paper No. 97, The OECD Green Model: an Updated Overview, by Hiro Lee, Joaquim Oliveira-Martins and Dominique van der Mensbrugghe, August 1994. Technical Paper No. 98, Pension Funds, Capital Controls and Macroeconomic Stability, by Helmut Reisen and John Williamson August 1994. Technical Paper No. 99, Trade and Pollution Linkages: Piecemeal Reform and Optimal Intervention, by John Beghin, David Roland-Holst and Dominique van der Mensbrugghe, October 1994. Technical Paper No. 100, International Initiatives in Biotechnology for Developing Country Agriculture: Promises and Problems, by Carliene Brenner and John Komen, October 1994. Technical Paper No. 101, Input-based Pollution Estimates for Environmental Assessment in Developing Countries, by Sbastien Dessus, David Roland-Holst and Dominique van der Mensbrugghe, October 1994. Technical Paper No. 102, Transitional Problems from Reform to Growth: Safety Nets and Financial Efficiency in the Adjusting Egyptian Economy, by Mahmoud Abdel-Fadil, December 1994. Technical Paper No. 103, Biotechnology and Sustainable Agriculture: Lessons from India, by Ghayur Alam, December 1994. Technical Paper No. 104, Crop Biotechnology and Sustainability: a Case Study of Colombia, by Luis R. Sanint, January 1995. Technical Paper No. 105, Biotechnology and Sustainable Agriculture: the Case of Mexico, by Jos Luis Solleiro Rebolledo, January 1995. Technical Paper No. 106, Empirical Specifications for a General Equilibrium Analysis of Labor Market Policies and Adjustments, by Andra Maechler and David Roland-Holst, May 1995. Document technique No. 107, Les Migrants, partenaires de la coopration internationale : le cas des Maliens de France, par Christophe Daum, juillet 1995. Document technique No. 108, Ouverture et croissance industrielle en Chine : tude empirique sur un chantillon de villes, par Sylvie Dmurger, septembre 1995.

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Technical Paper No. 109, Biotechnology and Sustainable Crop Production in Zimbabwe, by John J. Woodend, December 1995. Document technique No. 110, Politiques de lenvironnement et libralisation des changes au Costa Rica : une vue densemble, par Sbastien Dessus et Maurizio Bussolo, fvrier 1996. Technical Paper No. 111, Grow Now/Clean Later, or the Pursuit of Sustainable Development?, by David OConnor, March 1996. Technical Paper No. 112, Economic Transition and Trade-Policy Reform: Lessons from China, by Kiichiro Fukasaku and HenriBernard Solignac Lecomte, July 1996. Technical Paper No. 113, Chinese Outward Investment in Hong Kong: Trends, Prospects and Policy Implications, by Yun-Wing Sung, July 1996. Technical Paper No. 114, Vertical Intra-industry Trade between China and OECD Countries, by Lisbeth Hellvin, July 1996. Document technique No. 115, Le Rle du capital public dans la croissance des pays en dveloppement au cours des annes 80, par Sbastien Dessus et Rmy Herrera, juillet 1996. Technical Paper No. 116, General Equilibrium Modelling of Trade and the Environment, by John Beghin, Sbastien Dessus, David Roland-Holst and Dominique van der Mensbrugghe, September 1996. Technical Paper No. 117, Labour Market Aspects of State Enterprise Reform in Viet Nam, by David OConnor, September 1996. Document technique No. 118, Croissance et comptitivit de lindustrie manufacturire au Sngal, par Thierry Latreille et Aristomne Varoudakis, octobre 1996. Technical Paper No. 119, Evidence on Trade and Wages in the Developing World, by Donald J. Robbins, December 1996. Technical Paper No. 120, Liberalising Foreign Investments by Pension Funds: Positive and Normative Aspects, by Helmut Reisen, January 1997. Document technique No. 121, Capital Humain, ouverture extrieure et croissance : estimation sur donnes de panel dun modle coefficients variables, par Jean-Claude Berthlemy, Sbastien Dessus et Aristomne Varoudakis, janvier 1997. Technical Paper No. 122, Corruption: The Issues, by Andrew W. Goudie and David Stasavage, January 1997. Technical Paper No. 123, Outflows of Capital from China, by David Wall, March 1997. Technical Paper No. 124, Emerging Market Risk and Sovereign Credit Ratings, by Guillermo Larran, Helmut Reisen and Julia von Maltzan, April 1997. Technical Paper No. 125, Urban Credit Co-operatives in China, by Eric Girardin and Xie Ping, August 1997. Technical Paper No. 126, Fiscal Alternatives of Moving from Unfunded to Funded Pensions, by Robert Holzmann, August 1997. Technical Paper No. 127, Trade Strategies for the Southern Mediterranean, by Peter A. Petri, December 1997. Technical Paper No. 128, The Case of Missing Foreign Investment in the Southern Mediterranean, by Peter A. Petri, December 1997. Technical Paper No. 129, Economic Reform in Egypt in a Changing Global Economy, by Joseph Licari, December 1997. Technical Paper No. 130, Do Funded Pensions Contribute to Higher Aggregate Savings? A Cross-Country Analysis, by Jeanine Bailliu and Helmut Reisen, December 1997. Technical Paper No. 131, Long-run Growth Trends and Convergence Across Indian States, by Rayaprolu Nagaraj, Aristomne Varoudakis and Marie-Ange Vganzons, January 1998. Technical Paper No. 132, Sustainable and Excessive Current Account Deficits, by Helmut Reisen, February 1998. Technical Paper No. 133, Intellectual Property Rights and Technology Transfer in Developing Country Agriculture: Rhetoric and Reality, by Carliene Brenner, March 1998. Technical Paper No. 134, Exchange-rate Management and Manufactured Exports in Sub-Saharan Africa, by Khalid Sekkat and Aristomne Varoudakis, March 1998. Technical Paper No. 135, Trade Integration with Europe, Export Diversification and Economic Growth in Egypt, by Sbastien Dessus and Akiko Suwa-Eisenmann, June 1998. Technical Paper No. 136, Domestic Causes of Currency Crises: Policy Lessons for Crisis Avoidance, by Helmut Reisen, June 1998. Technical Paper No. 137, A Simulation Model of Global Pension Investment, by Landis MacKellar and Helmut Reisen, August 1998. Technical Paper No. 138, Determinants of Customs Fraud and Corruption: Evidence from Two African Countries, by David Stasavage and Ccile Daubre, August 1998. Technical Paper No. 139, State Infrastructure and Productive Performance in Indian Manufacturing, by Arup Mitra, Aristomne Varoudakis and Marie-Ange Vganzons, August 1998. Technical Paper No. 140, Rural Industrial Development in Viet Nam and China: A Study in Contrasts, by David OConnor, September 1998. Technical Paper No. 141,Labour Market Aspects of State Enterprise Reform in China, by Fan Gang,Maria Rosa Lunati and David OConnor, October 1998. Technical Paper No. 142, Fighting Extreme Poverty in Brazil: The Influence of Citizens Action on Government Policies, by Fernanda Lopes de Carvalho, November 1998. Technical Paper No. 143, How Bad Governance Impedes Poverty Alleviation in Bangladesh, by Rehman Sobhan, November 1998. Document technique No. 144, La libralisation de lagriculture tunisienne et lUnion europenne : une vue prospective, par Mohamed Abdelbasset Chemingui et Sbastien Dessus, fvrier 1999. Technical Paper No. 145, Economic Policy Reform and Growth Prospects in Emerging African Economies, by Patrick Guillaumont, Sylviane Guillaumont Jeanneney and Aristomne Varoudakis, March 1999. Technical Paper No. 146, Structural Policies for International Competitiveness in Manufacturing: The Case of Cameroon, by Ludvig Sderling, March 1999. Technical Paper No. 147, Chinas Unfinished Open-Economy Reforms: Liberalisation of Services, by Kiichiro Fukasaku, Yu Ma and Qiumei Yang, April 1999. Technical Paper No. 148, Boom and Bust and Sovereign Ratings, by Helmut Reisen and Julia von Maltzan, June 1999. Technical Paper No. 149, Economic Opening and the Demand for Skills in Developing Countries: A Review of Theory and Evidence, by David OConnor and Maria Rosa Lunati, June 1999. Technical Paper No. 150, The Role of Capital Accumulation, Adjustment and Structural Change for Economic Take-off: Empirical Evidence from African Growth Episodes, by Jean-Claude Berthlemy and Ludvig Sderling, July 1999. Technical Paper No. 151, Gender, Human Capital and Growth: Evidence from Six Latin American Countries, by Donald J. Robbins, September 1999.

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Technical Paper No. 152, The Politics and Economics of Transition to an Open Market Economy in Viet Nam, by James Riedel and William S. Turley, September 1999. Technical Paper No. 153, The Economics and Politics of Transition to an Open Market Economy: China, by Wing Thye Woo, October 1999. Technical Paper No. 154, Infrastructure Development and Regulatory Reform in Sub-Saharan Africa: The Case of Air Transport, by Andrea E. Goldstein, October 1999. Technical Paper No. 155, The Economics and Politics of Transition to an Open Market Economy: India, by Ashok V. Desai, October 1999. Technical Paper No. 156, Climate Policy Without Tears: CGE-Based Ancillary Benefits Estimates for Chile, by Sbastien Dessus and David OConnor, November 1999. Document technique No. 157, Dpenses dducation, qualit de lducation et pauvret : lexemple de cinq pays dAfrique francophone, par Katharina Michaelowa, avril 2000. Document technique No. 158, Une estimation de la pauvret en Afrique subsaharienne daprs les donnes anthropomtriques, par Christian Morrisson, Hlne Guilmeau et Charles Linskens, mai 2000. Technical Paper No. 159, Converging European Transitions, by Jorge Braga de Macedo, July 2000. Technical Paper No. 160, Capital Flows and Growth in Developing Countries: Recent Empirical Evidence, by Marcelo Soto, July 2000. Technical Paper No. 161, Global Capital Flows and the Environment in the 21st Century, by David OConnor, July 2000. Technical Paper No. 162, Financial Crises and International Architecture: A Eurocentric Perspective, by Jorge Braga de Macedo, August 2000. Document technique No. 163, Rsoudre le problme de la dette : de linitiative PPTE Cologne, par Anne Joseph, aot 2000. Technical Paper No. 164, E-Commerce for Development: Prospects and Policy Issues, by Andrea Goldstein and David OConnor, September 2000. Technical Paper No. 165, Negative Alchemy? Corruption and Composition of Capital Flows, by Shang-Jin Wei, October 2000. Technical Paper No. 166, The HIPC Initiative: True and False Promises, by Daniel Cohen, October 2000. Document technique No. 167, Les facteurs explicatifs de la malnutrition en Afrique subsaharienne, par Christian Morrisson et Charles Linskens, octobre 2000. Technical Paper No. 168, Human Capital and Growth: A Synthesis Report, by Christopher A. Pissarides, November 2000. Technical Paper No. 169, Obstacles to Expanding Intra-African Trade, by Roberto Longo and Khalid Sekkat, March 2001. Technical Paper No. 170, Regional Integration In West Africa, by Ernest Aryeetey, March 2001. Technical Paper No. 171, Regional Integration Experience in the Eastern African Region, by Andrea Goldstein and Njuguna S. Ndungu, March 2001. Technical Paper No. 172, Integration and Co-operation in Southern Africa, by Carolyn Jenkins, March 2001. Technical Paper No. 173, FDI in Sub-Saharan Africa, by Ludger Odenthal, March 2001 Document technique No. 174, La rforme des tlcommunications en Afrique subsaharienne, par Patrick Plane, mars 2001. Technical Paper No. 175, Fighting Corruption in Customs Administration: What Can We Learn from Recent Experiences?, by Irne Hors; April 2001. Technical Paper No. 176, Globalisation and Transformation: Illusions and Reality, by Grzegorz W. Kolodko, May 2001. Technical Paper No. 177, External Solvency, Dollarisation and Investment Grade: Towards a Virtuous Circle?, by Martin Grandes, June 2001. Document technique No. 178, Congo 1965-1999: Les espoirs dus du Brsil africain , par Joseph Maton avec Henri-Bernard Solignac Lecomte, septembre 2001. Technical Paper No. 179, Growth and Human Capital: Good Data, Good Results, by Daniel Cohen and Marcelo Soto, September 2001. Technical Paper No. 180, Corporate Governance and National Development, by Charles P. Oman, October 2001. Technical Paper No. 181, How Globalisation Improves Governance, by Federico Bonaglia, Jorge Braga de Macedo and Maurizio Bussolo, November 2001. Technical Paper No. 182, Clearing the Air in India: The Economics of Climate Policy with Ancillary Benefits, by Maurizio Bussolo and David OConnor, November 2001. Technical Paper No. 183, Globalisation, Poverty and Inequality in sub-Saharan Africa: A Political Economy Appraisal, by Yvonne M. Tsikata, December 2001. Technical Paper No. 184, Distribution and Growth in Latin America in an Era of Structural Reform: The Impact of Globalisation, by Samuel A. Morley, December 2001. Technical Paper No. 185, Globalisation, Liberalisation, Poverty and Income Inequality in Southeast Asia, by K.S. Jomo, December 2001. Technical Paper No. 186, Globalisation, Growth and Income Inequality: The African Experience, by Steve Kayizzi-Mugerwa, December 2001. Technical Paper No. 187, The Social Impact of Globalisation in Southeast Asia, by Mari Pangestu, December 2001. Technical Paper No. 188, Where Does Inequality Come From? Ideas and Implications for Latin America, by James A. Robinson, December 2001. Technical Paper No. 189, Policies and Institutions for E-Commerce Readiness: What Can Developing Countries Learn from OECD Experience?, by Paulo Bastos Tigre and David OConnor, April 2002. Document technique No. 190, La rforme du secteur financier en Afrique, par Anne Joseph, juillet 2002. Technical Paper No. 191, Virtuous Circles? Human Capital Formation, Economic Development and the Multinational Enterprise, by Ethan B. Kapstein, August 2002. Technical Paper No. 192, Skill Upgrading in Developing Countries: Has Inward Foreign Direct Investment Played a Role?, by Matthew J. Slaughter, August 2002. Technical Paper No. 193, Government Policies for Inward Foreign Direct Investment in Developing Countries: Implications for Human Capital Formation and Income Inequality, by Dirk Willem te Velde, August 2002. Technical Paper No. 194, Foreign Direct Investment and Intellectual Capital Formation in Southeast Asia, by Bryan K. Ritchie, August 2002. Technical Paper No. 195, FDI and Human Capital: A Research Agenda, by Magnus Blomstrm and Ari Kokko, August 2002.

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Technical Paper No. 196, Knowledge Diffusion from Multinational Enterprises: The Role of Domestic and Foreign KnowledgeEnhancing Activities, by Yasuyuki Todo and Koji Miyamoto, August 2002. Technical Paper No. 197, Why Are Some Countries So Poor? Another Look at the Evidence and a Message of Hope, by Daniel Cohen and Marcelo Soto, October 2002. Technical Paper No. 198, Choice of an Exchange-Rate Arrangement, Institutional Setting and Inflation: Empirical Evidence from Latin America, by Andreas Freytag, October 2002. Technical Paper No. 199, Will Basel II Affect International Capital Flows to Emerging Markets?, by Beatrice Weder and Michael Wedow, October 2002. Technical Paper No. 200, Convergence and Divergence of Sovereign Bond Spreads: Lessons from Latin America, by Martin Grandes, October 2002. Technical Paper No. 201, Prospects for Emerging-Market Flows amid Investor Concerns about Corporate Governance, by Helmut Reisen, November 2002. Technical Paper No. 202, Rediscovering Education in Growth Regressions, by Marcelo Soto, November 2002. Technical Paper No. 203, Incentive Bidding for Mobile Investment: Economic Consequences and Potential Responses, by Andrew Charlton, January 2003. Technical Paper No. 204, Health Insurance for the Poor? Determinants of participation Community-Based Health Insurance Schemes in Rural Senegal, by Johannes Jtting, January 2003. Technical Paper No. 205, Chinas Software Industry and its Implications for India, by Ted Tschang, February 2003. Technical Paper No. 206, Agricultural and Human Health Impacts of Climate Policy in China: A General Equilibrium Analysis with Special Reference to Guangdong, by David OConnor, Fan Zhai, Kristin Aunan, Terje Berntsen and Haakon Vennemo, March 2003. Technical Paper No. 207, Indias Information Technology Sector: What Contribution to Broader Economic Development?, by Nirvikar Singh, March 2003. Technical Paper No. 208, Public Procurement: Lessons from Kenya, Tanzania and Uganda, by Walter Odhiambo and Paul Kamau, March 2003. Technical Paper No. 209, Export Diversification in Low-Income Countries: An International Challenge after Doha, by Federico Bonaglia and Kiichiro Fukasaku, June 2003.

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