Regarding the Arab region, GDP per capita virtually stagnated for more than 20 years from 1980. During the same period, GDP per capita in the world’s highly industrialized states further increased and the gap between the Middle East and North Africa (MENA) and the highly developed countries widened. However, the differences between Arab countries and the Western states exist not only economically. The countries also differ regarding their political, legal, and social systems. This work explains the differences in development on the basis of institutional economics. In addition to a general theoretical part, an empirical analysis demonstrates the effects of institutions on income, and a historical case study explains the divergent development paths of the Arab region and selected advanced economies.
Author(s): Constanze Dobler
Series: Hohenheimer volkswirtschaftliche Schriften
Edition: 1
Publisher: Peter Lang International Academic Publishers
Year: 2011
Language: English
Pages: 238
City: Bern
Tags: Case; Cultural economics; Dobler; Economic; Empirical institutional analysis; Formal; Growth; Impact; Informal; Institutions; MENA; Political economics; Region; Study
Contents
Figures XI
Tables XIII
Abbreviations and variables XIV
1. Introduction 1
2. Institutions – a theoretical approach 10
2.1 Introduction 10
2.2 Formal and informal institutions 15
2.3 Growth-supporting institutions 18
2.4 Transaction costs 20
2.5 Institutional change and transplantation 21
2.6 Institutions and technology 28
2.7 Equilibrium view of institutions 33
2.7.1 General remarks 33
2.7.2 Shared-beliefs cum equilibrium-summary-representation approach 35
2.7.2.1 Model I 38
2.8 The form of societal organization 47
2.8.1 Model II 48
2.8.1.1 Horizontal and vertical societal structures 55
3. Institutions – an empirical approach 61
3.1 Informal institutions 61
3.1.1 Trust 63
3.1.2 Limited and generalized morality 64
3.1.3 Beliefs that encourage the accumulation of physical and human capital 67
3.1.3.1 Destiny 67
3.1.3.2 Life after death 68
3.2 Formal institutions 69
3.2.1 Property rights 69
3.2.2 Legal system – the rule of law 71
3.2.3 Form of government – democracy 73
3.3 Measuring institutions – a literature review 75
3.4 Endogeneity 83
3.5 Deep determinants of growth 86
3.6 Methodical issues 88
3.6.1 Two stage least squares 89
3.7 Religion as an instrumental variable for institutions 92
3.8 Regression analysis: the impact of formal and informal institutions on per capita income 101
3.8.1 Data 101
3.8.2 Regression approach 106
3.8.3 Regression results 108
4. Institutions and economic development in the MENA region 123
4.1 Introduction 123
4.2 Arab economic performance 126
4.3 Economic development in the second half of the 20th century 129
4.4 Total factor productivity 132
4.5 Investment 133
4.6 Public sector 136
4.7 Demography and education 138
4.8 Business environment 140
4.9 Financial sector 143
4.10 Trade 147
4.11 Corruption and red tape 148
4.12 Political and legal Institutions 150
4.12.1 Property rights 151
4.12.2 Constraints on the executive and democracy 152
4.12.3 Good governance 157
4.13 Informal institutions 165
4.13.1 Trust 165
4.13.2 Control 166
4.13.3 Respect and obedience 167
5. Differences in early institutional development 176
5.1 Introduction 176
5.2 The emergence of state and religion 179
5.3 The acceptance of Islamic occasionalism and the role of foreign sciences 182
5.4 Law 190
5.5 Corporate institutions 194
5.6 Education 196
5.7 The waqf 198
5.8 Foreign rule and historical accidents 199
5.9 Prohibition of interest 203
6. Conclusion: connection between the general institutional analysis and the case study on the MENA region 205
References 212
Data sources 227
Appendix A 229
Appendix B 232
