Essays in Comparative Institutional Economics

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Grajzl, Peter
Murrell, Peter
This dissertation examines how decentralized institutional structures and organizational forms evolve and affect economic development under different politico-economic and legal arrangements. Organized legal professions are typically viewed by economists as rent-seeking interest groups - even though they have been central in institutional development in countries with the highest quality institutions. Chapter 1 develops a model that identifies the link between the role of organized legal professions and the quality of reform. Delaying institutional reform through deliberation, the profession's participation discounts the expected benefit from welfare-inferior reform proposal for rent-seeking interest groups. Professional review serves as a screening mechanism ameliorating the self-interested government's adverse selection problem. The model's predictions cast new light on the Glorious and the French revolutions, post-communist transition, why and when civil law and common law systems differ, and why post-independence institutions are of higher quality in settler than in extractive colonies. Although common, self-regulation as an alternative to direct government regulation has been little investigated. Chapter 2 uses a framework inspired by property rights theory to address the allocation of regulatory authority. In a model of a regulatory process with bargaining, the authority to amend the enabling legislation can be either consolidated within the government, or extended to the producers in a self-regulatory regime. The chapter delineates the welfare implications of regulatory regime choice, and indicates whether the government's incentives to delegate or centralize regulatory authority lead to efficient institutional design. The model identifies those features of legal traditions that help to explain variation in regulatory arrangements across countries, illuminates the contrast in regulatory practice between the progressive era and the associational regime of the New Deal, and characterizes the mechanisms of intervention used in fascist economies. Chapter 3 discusses the channels through which civil society is expected to affect economic development. Utilizing the formal analysis laid out in Chapter 1, the chapter provides an introductory examination of the rationale for civil society aid and concludes with a conjectural interpretation of the determinants of the aid's effectiveness to bring about successful institutional change in post-communist countries.