Institutional specialization

Guimaraes, Bernardo and Sheedy, Kevin D. ORCID: 0000-0002-0247-6323 (2024) Institutional specialization. Journal of International Economics, 150. ISSN 1464-3758

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Abstract

This paper presents a theory of institutional specialization in which some countries uphold the rule of law while others choose extractive institutions, even when countries are ex-ante identical. The driving force of specialization is that for incumbents in each country, the first steps to the rule of law have the greatest cost. Good institutions require sharing power and rents, but in places where power is already shared broadly, each power base or branch of government underpinning institutions is individually less important and thus receives lower rents. Countries with diametrically opposed institutions have a symbiotic relationship in the world equilibrium. The transition from sail to steam-powered vessels in 19th-century trade provides suggestive evidence supporting the theory.

Item Type:	Article
Additional Information:	© 2024 Elsevier
Divisions:	Centre for Macroeconomics Economics
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	F - International Economics > F0 - General > F00 - General O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy; Legal Institutions; Property Rights
Date Deposited:	28 Mar 2024 17:09
Last Modified:	12 Dec 2024 04:07
URI:	http://eprints.lse.ac.uk/id/eprint/122547

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