The Corruption of Local Elites in Francophone and Anglophone Africa

Merima Ali (CMI and Syracuse University)
Odd-Helge Fjeldstad (CMI)
Abdulaziz B. Shifa (Syracuse University)

Abstract : Although colonialism is often argued to have a profound implication for post-colonial economic and institutional outcomes, the effect of colonial rules on local power structure remains under-explored. In this study, we propose a hypothesis regarding how the differences in British and French colonial rules shaped the interaction between political influence and accountability of local elites. Given the differences in the approaches to colonial rule, we hypothesize that the association between the greater political influence of local elites and their accountability is weaker in Anglophone countries. Using regression discontinuity analysis on observations within split-by-the-border ethnic homelands between Anglophone and Francophone countries, we present empirical evidence that is consistent with our hypothesis.

Mapping the Landscape of Transactions: the Governance of Business Relations in Latin America

David Francis (World Bank)
Nona Karalashvili (World Bank)
Peter Murrell (University of Maryland)

Abstract : To what extent do firms use trust, law, and third-parties to ensure fulfillment of agreements to transact? How do they combine these mechanisms to form transactional governance structures? How do answers to these questions vary across countries? Generating the relevant data requires constructing a survey question answerable by any firm, anywhere. The question is administered in six South American countries. Applied to the resultant data, latent class analysis (LCA) estimates classes that correspond to the transactional governance structures that firms employ to support implementation of agreements. Without imposing an a priori model, LCA discovers meaningful governance structures. Bilateralism appears in all governance structures. Law is never used alone. Bilateralism and formal institutions are sometimes complements, never substitutes. Within-country regional variation in the use of bilateralism and law exceeds cross-country variation. LCA provides the posterior probabilities that each firm uses each governance structure, facilitating testing hypotheses consequent on Williamson's discriminating-alignment agenda.

The Role of Institutions, Ethnic Fractionalization and Colonization and Their Impact on Economic Growth and Development in Democratic Republic of Congo, Ethiopia, Eritrea and Kenya.

Sarah Hall (Frankfurt School of Finance and Management)
Mabel Ollimo (Frankfurt School of Finance and Management)

Abstract : In this thesis, we will explore what led to the economic development and growth or lack of, in four African Countries with an imperial history. The countries chosen, have two different modern trajectories, the first of the countries; The Democratic Republic of Congo and Kenya have a history of European colonization, whilst Ethiopia and Eritrea, resisted European colonization. In this study, we will look at the reasons why the countries developed the way they did, what led to their colonization or resistance, how the different type of settlements influenced the already existing formal or informal institutions or led to their creation, and if there is a relationship between introducing these post-modern institutional structures on the economic development of each country and to what extent did that affect economic, political and social growth. The main idea behind this thesis is to check which existing literature already exists to explain the modern trajectories and to what extent did they go, we will also look at arguments which may lead to current ideas and theories in the formulation of this research. We are aware that this type of research topic is new in the academic world and will be adding to the nonexistent research on the African Countries we have chosen. We will also use the new institutional economics ideas to help explain some of the results we might find.

Doing Business in a Deals World: the Doubly False Premise of Rules Reform

Sabyasachi Kar (IEG, India)
Lant Pritchett (U of Oxford, UK)
Spandan Roy (IEG, India)
Kunal Sen (UNU-WIDER and U of Manchester, UK)

Abstract : The World Bank’s Doing Business Reports have evoked an intense policy debate about whether countries should simplify regulatory rules in order to stimulate investment and growth or make them more stringent in order to achieve public policy objectives. Both sides of this debate however, assume that the business environment in developing countries is defined and determined by the exact implementation of these rules by the state and by firms, an assumption demonstrated to be false by a number of studies. These studies seem to indicate that rather than these rules, doing business in developing countries is based on deals struck between firms and the political or bureaucratic arms of the state. In this paper, we undertake a cross-country analysis of the relationship between the rules related to doing business and these deals, particularly in the context of the state’s capability in implementing them. Using data from the Doing Business reports, the World Bank’s Enterprise Survey and other sources, we show that (i) while there is a relationship between rules and deals, it is a weak one and (ii) this relationship is itself dependent on the level of a country’s state capability, with the impact of rules on deals getting further weakened if the state capability is low and (iii) with stringent rules and very low levels of state capability, the relationship becomes perverse, with more stringent rules leading to less compliance, rather than more. Based on these results, we provide a diagnostic approach to rules reform where the appropriate reform depend on the level of stringency of the rules in a country, and the level of its state capability.