Institutions matter as regards foreign location investment decisions, but how they matter and in what ways, is still unsettled. We differentiate between absolute and relative institutional effects on both location choice and on the size of the FDI and do so by examining India's outward FDI flows between 2008 and 2020. We find that absolute and relative institutional measures have different effects, and these are noticeable at different stages. We show that the quality of institutions affects location choice, but once they have made that decision then the scale of the investment is impacted by institutional threshold effects and institutional distance, and we explain why this could be the case. We provide further nuance to studies on the asymmetrical effects of institutions on outward FDI. We provide empirical evidence that the effects of absolute institutions matter more where host countries lie at the lower end of the institutional profile distribution. Likewise with institutional distance—it might not be the direction of the difference that matters so much as where the host country is located along the institutional profile distribution. This has substantial consequences from both a managerial and a policy perspective.

It is now abundantly clear that social norms channel behaviour and impact economic development. This insight leads to the question: How do social norms evolve? This survey examines research that relies on geography to explain the development of social norms. It turns out that many social norms are either directly or indirectly determined by geography broadly conceived and can, hence, be considered largely time invariant. Given that successful economic development presupposes the congruence between formal institutions and social norms, this insight is highly relevant for all policy interventions designed to foster economic development. In a companion paper, the role of religion and family organization as potential mediators between geography and social norms assumes centre stage.

It is often argued that governments take advantage of extreme events to expand their power to the detriment of the political opposition and citizens at large. Violations of constitutional constraints are a clear indication of such opportunistic behaviour. We study whether natural disasters, conflicts and other extreme events systematically diminish governments' compliance with constitutional constraints. Our results indicate that governments are most likely to overstep their competences or disregard their responsibilities during civil conflicts, at the onset of international sanctions or following successful coups d’état. Interestingly, Cold War interventions by the United States that installed or supported a political leader led to a decrease in constitutional compliance in the target country, whereas Soviet interventions had no such effect. In contrast, banking crises and natural disasters, which threaten societies at large, but not necessarily the political elite, do not cause a significant decline in constitutional compliance.

A growing strand of literature relates pro-market institutions to business and overall employment creation. However, the effects of pro-market institutions on industry-specific employment creation still need to be better understood. Employment creation in some industries may be more sensitive to pro-market institutions. Moreover, if these industries employ a large proportion of the population, the role of local-level institutions becomes more critical for boosting employment creation across industries. Therefore, we disentangle the effects of local-level pro-market institutions on employment creation across nine major industries by using 5-year balanced panel data of 374 US metropolitan areas from 1972 to 2017. Our fixed-effects results indicate that pro-market institutions boost employment creation only in the manufacturing, retail, and construction sectors. Furthermore, our findings reveal that local public policies can benefit or harm local employment creation, depending on the concentration of industries in the area.

James Buchanan was a fervent advocate of a non-discriminatory politics. However, he translated his views on constitutional political economy into (de jure) constitutional design in an insufficiently thoughtful way. Simply writing non-discriminatory politics into a Constitution is unlikely to have the desired effect. All Constitutional language is open to interpretation and political entrepreneurs will be ready to push interpretation in their favoured directions. The history of US Constitutional law bears this out. This does not necessarily discount Buchanan's quest for constitutionalized non-discriminatory politics. However, it does mean that it must be tempered by realistic concerns regarding constitutional design. With this in mind, I suggest that focusing on procedural, rather than substantive, Constitutional provisions may be more fruitful.

The ancient Greek city-states were slave societies, but the institutions of slavery differed across them. The slaves of democratic Athens were foreigners bought as chattels labouring in agriculture, craftsmanship, banking, mining, and domestic services and were often given some limited freedoms and extra pay. On the contrary, the helots, the slaves of oligarchic Sparta, were indigenous of the lands they cultivated for their masters and were treated harshly. The study offers an economic explanation of the different slavery systems. Modelling the slaveholder as a profit maximiser, it attributes the different systems to differences in the probabilities of the slaves running away or revolting, the dependence of output on effort-intensive or care-intensive production technology, which depends on the fertility of the soil and affects whether the slave is treated kindly instead of harshly, and the cost of guarding slaves under different regimes.

We investigate whether workplace voice through institutionalized forms of employee representation (ER) affects the design of firm hierarchies. We look at the role of ER within a knowledge-based view of hierarchies, where the firm's choice of hierarchical layers depends on the trade-off between communication and knowledge acquisition costs. Using a sample of more than 20,000 private-sector firms in 32 countries, we find that the presence of ER is positively associated with the number of organizational layers, though the relationship is tempered by firm size. ER positively correlates with job training, skill development and enhanced internal communication via staff meetings. The analysis of managers' perceptions suggests the higher frequency of meetings in firms with ER does not lead to more delays in the implementation of organizational changes. Taken together, our findings point to ER as facilitating the flow of information to top decision-makers and hence reducing communication costs. This may enable the firm to economize scarce cognitive resources without retarding the accumulation of new shop-floor capabilities. We contribute to recent literature on organizational design by suggesting ER institutions as possibly relaxing the trade-off between communication and knowledge acquisition costs within firms.

This study revisits the question of what impact Japanese colonialism had on the long-term economic development of North and South Korea. Factor endowments, economic activity and economic performance are compared between the regions that later became parts of North and South Korea, respectively. The study finds that important elements of the economic history of the peninsula have not been sufficiently acknowledged in much of the influential literature that uses Korea as an illustration of theoretical claims of the root causes of development. In particular, the fact that the economic divergence of northern and southern regions could be traced back to different colonial treatments – especially after mid-1920s – has often been overlooked when analysing the divergent post-partition development trajectories. The study suggests, based on a sectoral similarities analysis, that the initial dissimilar economic performance of North and South can at least partially be found in differences in political economy and economic trajectories preceding the partition.

James M. Buchanan's politics-as-exchange retrospectively conceptualized formal institutions emerging from bilateral agreements to establish reciprocal rights and prospectively guided constitutional entrepreneurs to broker Pareto-superior reforms that had unanimous consent. Buchanan believed this conceptualization of politics-as-exchange was necessitated by his ontological–methodological individualism and would initiate a new era of consensual politics, but it is argued it led to illiberal conclusions that reflected dissonance between his Kantian individualism and Humean subjectivism. It meant, for example, that slavery was characterized as a bilateral agreement between very unequal parties and it is argued it logically implied abolition required the consent of slaveowners. But Buchanan's ontology was compatible with the introduction into his framework of a right of exit that would have differentiated between exchanges with and without the sword to produce a consistent liberal constitutionalism.

This article combines cross-national statistical analysis and in-depth historical case studies of Argentina and Chile to explore the relationship between two crucial dimensions of state capacity. We show that information capacity contributes to the development of fiscal capacity. When states have accurate information about their subject populations, territories, and economies, they are more effective at mobilizing revenues. In developing this argument this article makes three broader contributions. First, while existing scholarship either treats distinct dimensions of state capacity as separate entities, or simply assumes that they complement each other, our findings urge scholars to treat state development as sequential and to further investigate how multiple dimensions of state capacity are interrelated. Second, the paper suggests a broader underlying set of mechanisms – economies of scope – which connect these dimensions, and explores them in the specific context of how information capacity facilitates fiscal capacity. Third, we join the scholarship on the importance of societal compliance in the creation of the fiscal state, but with a focus on elite cooperation with the state's information collection efforts, which we show to be crucial to tax state development.

This is an introduction to the special issue that presents new research on the state and its links to economic and social development. The special issue focuses on the processes of institutional transformation of the state, looking at how fiscal states arise in the developing world. The resulting set of articles presents a variety of approaches, ranging from case studies (at state and regional level), to comparative historical analysis and to macro-quantitative (country and cross-country level) perspectives. The overarching message is that historical, political and institutional factors are key to understanding the process of fiscal states formation and change around the developing world.

The arguments that property rights and taxation positively affect development are well established in separate literatures, but the link between property rights and taxation is under-studied. To address this gap, we theorize, in the fiscal contract tradition, that property rights assigned and upheld by the state, as opposed to other political authorities, increase individual assent to taxation. We apply this argument to property rights on land in sub-Saharan-Africa, where the majority of land is governed by traditional authorities. Empirically we examine (1) the link between the state-assinged property rights on land and assent to taxation using individual-level data from Afrobarometer, and (2) the effect of state-led formalization, measured through novel data on state-produced cadastral records, and revenue from taxes on individuals in a panel of 37 sub-Saharan African countries across 35 years. We find support for our argument that there is no taxation without state-assigned property rights.

The paper examines the legacy of pre-colonial centralization on tax compliance norms of citizens in contemporary Uganda. Using a regression discontinuity analysis on neighboring ethnic homelands with different levels of pre-colonial centralization, we find that pre-colonial centralization is correlated with stronger norm for tax compliance. The result is explained by the legacy of location-specific capacity of centralized states in upholding authority and a strong social cohesion exhibited through higher interpersonal trust but not through trust in public institutions.

We argue that tax revenues and political institutions placing constraints on the executive power may reinforce each other over time and so co-evolve in the long run. This may also bring a shift in the composition of revenues, from taxes levied on a narrow base to broadly levied taxes. To test these hypotheses, we use historical cross-country data covering 31 countries for 1800–2012 and panel time series methods allowing for different forms of country-specific heterogeneity and cross-section dependence. The results offer three main findings. First, executive constraints, whether they are judicial or legislative, and tax revenues are cointegrated. While in the short run they can drift apart, this will be temporary because there is a long-run relationship between the two. Second, evidence of cointegration is strongest for revenues from direct taxes, suggesting that the existence and nature of a long-run relationship may be mainly related to the emergence of broad-based taxation. Third, long-run causality runs mostly from executive constraints to taxation. This is most evident for income taxes. Our findings link Sustainable Development Goals 16 and 17, implying that the goal of promoting inclusive and accountable institutions may work in synergy with that of generating internal resources to finance development goals.

This paper contributes to research on the institutional determinants of tax capacity using annual data from 39 sub-Saharan African countries from 1985 to 2018 to construct a measure of tax capacity for each country based on the trend component of the ratio of actual to potential tax revenue. Potential revenue is estimated by a parsimonious tax performance specification, including only variables found to be robust determinants of the tax/GDP ratio. The results show that, on average, tax capacity is high (given potential) and has improved over time (especially for low-income countries). The final stage of analysis selects, from a wide variety of economic and institutional variables, the most important determinants of cross-country variation in tax capacity. Equal distribution of resources is the most important institutional factor associated with greater capacity, consistent with perceptions of equity supporting the fiscal bargain; corruption is associated with lower capacity, consistent with undermining trust in government. Private consumption and resource rents are associated with greater capacity. Other institutional factors are indirectly associated with greater capacity, such as accountability and elements of democracy associated with equity in the allocation and use of public resources.

This paper makes the most of the observed actions of bribe takers and givers from the World Bank Enterprise Surveys and studies how a taker's action influences a giver's decision to pay bribes. To motivate our empirical study, we consider Kaufmann and Wei's (1999) Stackelberg game between a tax authority and a firm that undergoes tax inspection. The model predicts that, when the authority can use its action as a credible threat for the firm's profitability, the authority disturbs the firm by inspecting more, and the firm is more likely to pay bribes. Consistent with the theoretical prediction, we find correlational evidence that the propensity to pay bribes increases with the number of inspection visits, particularly for non-democratic countries.

Economic accounts of repugnance concern two broad questions: the rationalisation of sentiments of repugnance (do emotional and visceral reactions of repugnance track valid reasons for not engaging in or condemning certain (trans)actions?) and institutional design (how to institute, regulate, or restrict markets in response to reasonable objections). If repugnance expresses valid practical reasons for regulating or limiting markets, our institutions should acknowledge and express these. If attitudes of repugnance are not rationalisable in the sense of instrumental or moral values, we should disregard or eventually counteract or reduce them. Focusing on a special case of repugnance, when commodification, i.e., the sale of goods or services for money meets societal disapproval, this paper identifies three characteristic ways to combine conceptual, empirical, and normative arguments and map repugnance into a disciplinary ‘epistemic frame’ of economics: repugnance as taste; repugnance as proxy for market failures or moral reasons; repugnance as hypocrisy or contingent cultural fact. Correspondingly, economists advise to (1) work around; (2) make sense of; and (3) explain away people's sentiments of repugnance.

This paper assesses how to quantitatively classify countries as conforming to the ideal of an ‘open access order’ in the spirit of Douglass North, John Joseph Wallis, and Barry Weingast's Violence and Social Orders. It does so by taking the harmonic mean of already existing measures of economic freedom, liberal democracy, and state capacity. Thirty-five countries out of 161 in 2020 were assessed to be open access orders. A main dataset is constructed for the years 1950 to present, and a supplementary dataset for select countries is constructed for years back to 1850. Switzerland has the highest index score for open access orders in 2020, is classified to be an open access order continuously since 1950, and is the first country to be classified as an open access order (in 1875).

What was the turning point in the world's largest and deadliest outbreak of the Ebola virus disease? Public health interventions tend to focus on supply-side provision of public health goods. These goods are clinical resources such as medicine or equipment. However, no nation has enough resources to ‘treat’ its way out of a widespread epidemic. Behavioural changes, such as social distancing, are needed too. Behaviours are the demand-side of public health goods and if unaddressed, perpetuate disease transmission. Community-based institutions addressed demand-side barriers during the 2014 Ebola epidemic in Liberia and Sierra Leone. Sixty-seven interviews were conducted in several provinces in Liberia and Sierra Leone. The findings show that information asymmetry and collective action challenges lowered the demand for clinical resources. Community-based institutions intervened via health sensitization and emergency regulations. Therefore, health seeking and public cooperation improved. This research study demonstrates a need to integrate community-led action into public health emergency management.

In this article, we reconceptualize, using an extended discrete and dynamic Ostrom's classification, the specific intellectual property (IP) regimes that support geographical indications (GIs) as ‘knowledge commons’, e.g. a set of shared collective knowledge resources constituting a complex ecosystem created and shared by a group of people that has remained subject to social dilemma. Geographical names are usually considered part of the public domain. However, under certain circumstances, geographical names have also been appropriated through trademark registration. Our analysis suggests that IP laws that support GIs first emerged in Europe and spread worldwide as a response to the threat of undue usurpation or private confiscation through trademark registration. We thus emphasize the nature of the tradeoffs faced when shifting GIs from the public domain to shared common property regimes, as defined by the EU legislation pertaining to GIs. In the context of trade globalization, we also compare the pros and cons of regulating GIs ex-ante rather than engaging in ex-post trademark litigation in the courts.