Effects of Institutions on Economic and Social Outcomes

Paper Session

Saturday, Jan. 7, 2017 8:00 AM – 10:00 AM

Sheraton Grand Chicago, Michigan AB
Hosted By: Association for Comparative Economic Studies
  • Chair: Konstantin Sonin, University of Chicago

Firm Performance, Political Influence and External Shocks

Laura Solanko
,
Bank of Finland
Vladimir Sokolov
,
National Research University Higher School of Economics

Abstract

Using representative nation-wide survey data on manufacturing firms and official registry data, we study how changes in firms’ political influence at the regional level affects their financial performance. We find that firms that retained political influence throughout the sample period exhibit the highest profitability, while firms that lost influence following a key governance reform that disrupted old elite linkages accumulated larger cash holdings than non-influential firms. After conditioning the impact of political influence on the level of regional institutional development, we find that political influence significantly affects the financial performance of firms only in regions with poor institutions, while this connection is almost absent in regions with a relatively high level of democracy/market freedom. Most importantly, we show that firms that initially were politically influential but later lost their influence had a significantly higher probability to be liquidated after the 2008 global financial crisis. This finding suggests that politically connected firms that lose their influence are more vulnerable to exogenous shocks than firms that are not influential in the first place.

What Determines Corruption in China? Micro-Level Evidence

Zuzana Fungacova
,
Bank of Finland
Ilari Maatta
,
Bank of Finland
Laurent Weill
,
University of Strasbourg

Abstract

This research investigates the determinants of corruption in China using micro-level data. We use survey data on 6,000 households from 28 provinces to estimate logit models that show how corruption perceptions and attitudes to corruption are shaped by individual and provincial determinants. Respondents who see themselves as lower class, as well as members of the Communist Party of China, are more likely to perceive and reject corruption than other respondents. People in rural areas perceive less corruption, but do not differ in their attitudes toward corruption.

The Female Vote and the Rise of AKP in Turkey

Jan Fidrmuc
,
Brunel University London
Cigdem Borke Tunali
,
Istanbul University

Abstract

Differences between the voting behavior of men and women have become one of the most significant issues in social science research in recent years. In this study, we examine whether there is gender gap in voting behavior in Turkey. Using European Social Survey data, we find that education level and religiosity are the main determinants of voting behavior of both men and women in Turkey. There are significant differences between the genders, nevertheless. In particular, the effect of education on the support for the Justice and Development Party (AKP) and the Republican People’s Party (CHP) among male and female voters was different in the general election held in 2002. We argue that this outcome may be driven by the different labor-market implications of Islamization for male and female workers with intermediate skills.

Does Deep Economic Integration Increase State Capacity? Evidence From the 2004 European Union Enlargement and Beyond

Laszlo Bruszt
,
European University Institute
Nauro Campos
,
Brunel University London

Abstract

Institutions are long-run root causes of economic prosperity. But which ones matter the most? This answer currently centres on the notion of “state capacity” (meaning “the capacity to enforce law and order, regulate economic activity, and provide public goods,” Acemoglu et al., AER 2015, p.2364.) By the same token, interest in deep economic integration has recently exploded. Yet there are multiple ways integration takes place. One simple dichotomy contrasts shallow with deep, with the former restricted to economic and the latter to joint economic and political integration. This paper bridges these two literatures and investigates an unexplored mechanism: can deep economic integration increase state capacity? How can economic integration lead to institutional building? Is integration more effective in fostering some types of institutions more than others? Departing from a conceptual framework featuring key ideas from political economy, the separation of powers and the benefits of economic competition, this paper attempts to identify empirically key relationships between institutional reforms in three main areas, namely, the judiciary, bureaucracy, and competition policy. We focus on a unique database created on the basis of monitoring reports of each one of these areas in the run-up to the 2004 EU Eastern enlargement and beyond. We find a reduced number of key implementation sequences, chiefly among them the increase in the independence of the bureaucracy, which seems to have been driven by increase in judiciary capacity and the implementation of the EU policies related to the free movement of goods. We also find that while the enforcement of competition policies is driven by increase in the independence of judiciary, the later clearly depends on the increase in the powers of Supreme Courts. The paper concludes with a series of research questions our empirical analysis motivates.
Discussant(s)
Balazs Egert
,
OECD
Qing He
,
Renmin University of China
Konstantin Sonin
,
University of Chicago
Ralph de Haas
,
European Bank for Reconstruction and Development
JEL Classifications
  • P3 - Socialist Institutions and Their Transitions