Can foreign aid help free the press? Aid may boost press freedom by incentivizing government to reduce media regulations and provide financial support for infrastructure. Alternatively, foreign aid may prevent press freedom by expanding the role of the state and promoting government over private enterprises. We contend that the magnitude of foreign aid's influence is conditional on the existence of democratic checks. Using panel data from 1994 to 2010, we find evidence suggesting that aid significantly increases press freedom in democracies but insignificantly relates to press freedom in autocracies. Collectively, the results suggest that a standard deviation increase in aid to a country at the mean level of democracy increases press freedom by approximately a 1/20th standard deviation. Overall, the findings suggest that donors should be cautious as most aid recipients are not democratic and aid leads to only relatively small marginal improvements in press freedom.

I reply to amiable criticisms by Greif, Mokyr, Langlois, Lawson, and Tabellini of my own criticism of neo-institutionalism. They say that ‘culture’ is included in neo-institutionalism – which is mistaken on any serious definition of culture, such as those involving ethics, rhetoric, ideology, and ideas. They also say that neo-institutionalism has advanced beyond Max U and Samuelsonian economics. That's also mistaken. They do not attend to the humanities, which as ‘humanomics’ can indeed acknowledge ‘culture’ and non-Max U. Their particular historical examples show the opposite of what they think is shown. Ideas, rhetoric, ethics changed, and had to change, before institutions mattered.

Private constitutional rules can mitigate the Samaritan's Dilemma, a widespread cause of failure of aid and humanitarian efforts. To understand how private organizations can adopt rules that help overcome this dilemma, I provide evidence on an association formed to govern poor relief in urban Chicago from the 1850s to 1880s. I show how a particular set of shared ethical values led to the adoption of constitutional rules governing the organization. I then show that these rules were specific in their ability to mitigate the Samaritan's Dilemma problem inherent to administering aid. The argument advances the understanding of private institutional structures by demonstrating how rules can be designed in the private spheres to solve specific social dilemmas that plague state-led efforts to achieve similar goals.

This paper introduces Aristotle's conception of agency, habits and institutions as a way of contributing to some current discussions about the definition, nature and theory of institutions. Aristotle developed a theory of human action, where we can find a place for ‘agency’. His views on habits are linked to his theory of virtue and art (skill). Concerning institutions, Aristotle provides a sound social and political philosophy that encompasses the nature and role of institutions. The paper will subsequently present Aristotle's ideas on these three notions – agency, habits and institutions – and will finally establish which of the current accounts of institutions involved in the discussion sparked by Hindriks and Guala's recent paper (2005a) he would support. Given that some realities tackled in the paper are nowadays radically different from Aristotle's times, the paper tries to keep an ‘Aristotelian-minded’ point of view – that is, analysing current topics based on Aristotelian concepts.

The concept of institutional complementarity plays an important role in the comparative analysis of capitalism. It has often been criticised for being too static and too functionalist, unable to explain change because it would propose a view of institutional forms fitting perfectly with one another. After having presented the concept and its interest for comparative capitalism, this article argues in favour of its usefulness to explain institutional change. However, in order to be integrated fruitfully into a theory of institutional change, it is necessary to have a political economy definition of complementarity, which should not take institutions as some sort of inputs in a production function, but as socio-political compromises established in historically-specific conditions.

Several studies link development to institutions transplanted by European colonizers and here we extend this line of research to Asia. Japan imposed its system of well-defined property rights on some of its Asian colonies. In 1939, Japan began to register private land in its island colonies, an effort that was completed in Palau but interrupted elsewhere by World War II. Within Micronesia, robust economic development followed only in Palau where individual property rights were well defined. We show that well-defined property rights in Korea and Taiwan secured land taxation and enabled farmers to obtain bank loans for irrigation systems. Considering Japanese colonies, we use the presence or absence of a land survey as an instrument to identify the causal impact of new institutions. Our estimates show that property-defining institutions were important for economic development, results that are confirmed when using a similar approach with British Colonies in Asia.

I use matched county pairs on either side of US state borders to investigate the causal effects of the Economic Freedom of North America index (EFNA) on local outcomes. This method is similar to Dube et al. (2010). I construct a panel of county pairs running from 1981–2012 and four measures of outcomes, logged real incomes, logged real per capita incomes, employment, and logged real wages, employing single year and five year differences-in-differences. I find small, but precisely estimated, effects on incomes but mixed effects on wages and employment. All regressions show low R 2. This supports the hypothesis that state-level economic freedom improves capital income or that it attracts capital income across state borders.

Many countries have undertaken central-bank independence reforms, but the years of implementation differ. What explains such differences in timing? This is of interest more broadly, as it sheds light on factors that matter for the speed at which economic reforms come about. We study a rich set of potential determinants, both economic and political, but put special focus on a cultural factor, i.e. social trust. We find empirical support for an inverse u-shape: Countries with low and high social trust implemented their reforms earlier than countries with intermediate levels. We make use of two factors to explain this pattern: the need to undertake reform (which is more urgent in countries with low social trust) and the ability to undertake reform (which is greater in countries with high social trust). Overall, our findings imply that culture matters for institutional change.

The Arab Spring and subsequent global unrest sparked a debate about whether a fourth wave of democracy emerged in the global political arena starting in 2010. A key issue arises from these emerging democracies, or ‘countries in transition’, about what types of government institutions will be adopted by the new democracies. The previous literature on advanced democracies shows the economic structure of a nation impacted its choice of electoral rule system. This paper looks at what determines electoral rule choice in transitional nations. Using a panel database with 65 transitional countries with data for 18 years (1995 to 2012), this paper tests the argument that more coordinated market economies (CMEs) tend to adopt more proportional representative electoral rule systems during a political transition. Findings show that countries characterized as CMEs due to widespread primary education, which supports co-specific assets, and prominent industrial sectors have more proportional electoral rule systems.

Since the 1990s, Sunstein, Jolls, and Thaler have questioned the perfect rationality assumption in law and economics (L&E) and introduced a behavioral approach. But Gregory Mitchell has criticized behavioral law and economics (BL&E). He argues that much of the scholarship within the field describes psychological research as if it provides general laws of thought and behavior rather than insights conditional on the setting, on the characteristics of subjects, and on the specificity of the task in hand. Human heterogeneity is not adequately included in models developed under behavioral assumptions of this kind. This paper argues that Mitchell's work contributes to develop a cognitive approach to Law closer to the cognitive theory of institutions and to the Original Institutional Economics (OIE). Mitchell's contextualist approach seeks to identify the specific conditions under which irrational behavior occurs and to understand when and how it can be remedied.

In developing countries, lack of formal contract enforcement mechanisms is compensated by informal governance enforced through trust, kinship, reputation, etc. This paper focuses on one such setting in India's urban informal economy: the ‘day labour’ market for casual labour. We survey seven such markets in Navi Mumbai (a city on the outskirts of Mumbai), and find considerable incidence of contract enforcement problems in the form of employers reneging on wage payments to labourers. We find that payments to labourers with access to social networks and a record of work done are less likely to be reneged. Further, consistent with the literature on the limits of informal enforcement, we find that labourers in large markets, with greater linguistic and caste-based diversity, are more likely to be reneged. We argue that interventions aimed at facilitating access to formal mechanisms might help overcome some of the limitations with informal enforcement.

Political theories of property rights are less optimistic than self-governance perspectives regarding the ability of non-state organizations to supply private property institutions. Despite offering different answers to the question of where property rights come from, these diverse perspectives share a concern with organizational capacity, constraints, and legitimacy as explanations why organizations are able to supply private property rights. We use these shared concerns as a point of departure to investigate formal and informal private property rights in rural Afghanistan. We find that informal private property rights are more effective than formal private property rights because customary organizations fare better than the state on the dimensions of capacity, constraints, and legitimacy. More generally, these ‘political’ features of formal and informal organizations explain why self-governance works, as well as provide insight into the challenges confronting efforts in fragile states to establish formal private property institutions.

The Chettiar banking system evolved and functioned in the absence of a government sponsored central bank in 19th-century India. I find that the underlying common social institution of caste was crucial for the workings of the banking system and effectively acted as a club. Exclusion was achieved by restricting membership by birth and the practice of endogamy. These mechanisms created the necessary incentives to provide meaningful rules as well as their enforcement. I describe and analyze the privately provided self-regulatory mechanisms of clearinghouses, inter-bank lending and information sharing. The Chettiar banking system thus adds to existing instances of self-regulated banking as well as points to the economic underpinnings of caste as an institution.

This paper seeks to quantify the impact of transaction costs on cross-country economic growth. Our evidence from a cross-country panel data regression analysis reveals a persistent and robust negative effect of increasing transaction costs on the path of economic growth. The growth-enhancing effects of lower transaction costs are confirmed after controlling for the set of conditioning variables and further demonstrated in a cross-country growth model calibration. The results provide evidence that transaction costs might indeed be central to the study of cross-country productivity differences, suggest the importance of contractual relations and indicate their significant impact on cross-country economic performance over time.

With the beginning of the Napoleonic war at the turn of the 19th century, capitalist transformation in the German states and in the Habsburg Empire took different routes. The article analyses the political economy of both types of ‘defensive modernization’ from the viewpoint of institutional economics. We argue that initial reforms in German states gave way to a transformation process which drove a wedge between the interest of the monarchs and the landed nobility. Liberal reformers established a political bargain with the nobility which made capitalist institutions acceptable for the power holders. Later on, reformers established a ‘market preserving federalism’ which gave capitalism a further boost. By contrast, the dependence of the Austrian Emperor on the multiethnic nobility weakened the power of the central state. The transformation process in the Habsburg Empire remained dependent on the personal interests of the dominant coalition, which either delayed capitalism or sought to combine capitalism with protectionism on its own behalf. As a result, capitalist dynamics took up speed in Germany but were delayed in Austria.

While regulation is increasingly relied upon to address economic and social issues in developed economies, research has yet to examine the impact of the growing use of regulation on the courts. This paper explores the relationship between regulation and criminal judicial enforcement. Data regarding regulatory cases and defendants filed in U.S. district courts and regulation at the U.S. federal level are analyzed. The results suggest that increased reliance on regulation leads to growth in regulatory court cases and defendants filed. These findings imply that the courts continue to play an important role when regulation is employed to address problems and that the courts might experience increasing responsibilities as the use of regulation grows. Additionally, the results suggest that the relationship between regulation and the courts should be considered in the design and implementation of regulation in practice.

We challenge the ‘big-bang’ approach to economic history offered by Acemoglu et al. (2011). The creation story in dispute is the French Revolution and the subsequent French occupation of a very small portion of Germany. We show that the four institutional reforms claimed to have spurred German industrialization have been incorrectly dated. These corrections nullify any explanatory power of the ACJR econometric model. Moreover, even with the corrected vintages, their identification strategy is undermined by a flawed ‘explanatory’ variable – ‘years of reform’. We show that this variable simply enters their model as a year trend and explains nothing except the passage of time. We develop a fixed-effects model to capture the overlooked role of coal production that began in several regions shortly after 1840. This model offers a credible account of German industrialization and urbanization. Most economic change is, after all, continuous. Big-bang intrusions are of doubtful efficacy.

We assess informal institutions of Protestants and Catholics by investigating their economic resilience in a natural experiment. The First World War constitutes an exogenous shock to living standards since the duration and intensity of the war exceeded all expectations. We assess the ability of Protestant and Catholic communities to cope with increasing food prices and wartime black markets. Literature based on Weber (1904, 1905) suggests that Protestants must be more resilient than their Catholic peers. Using individual height data on some 2,800 Germans to assess levels of malnutrition during the war, we find that living standards for both Protestants and Catholics declined; however, the decrease of Catholics’ height was disproportionately large. Our empirical analysis finds a large statistically significant difference between Protestants and Catholics for the 1915–19 birth cohort, and we argue that this height gap cannot be attributed to socioeconomic background and fertility alone.

We analyse how female labour force participation responds to policies supporting the work-life balance, and do so using country-level data for 18 OECD countries from 1980 to 2007. Included is an original analysis of ‘complementarities’ between different policy measures, as well as of potential variations in their influence across different family policy regimes. The results highlight that expanded childcare service coverage affects women's labour market participation, which is greater in countries where support for working mothers is higher overall. But the influence of each single policy measure varies across regimes. Interactions between policy measures and the context in which they are implemented are important factors to consider since they can, for instance, either foster the positive impact of one measure or lessen the adverse effect of another.