Between the Green Pitch and the Red Tape: the Private Legal Order of Fifa

Suren Gomtsian (University of Leeds)
Annemarie Balvert (Tilburg University)
Branislav Hock (Tilburg University)
Oguz Kirman (Tilburg University)

Abstract : FIFA, football's (or soccer's, as it is known in some countries) world governing body, has long been associated with the World Cup and, lately, the corruption scandal. Less known is FIFA's success in building a legal order that competes with public orders. This study explains how and why this private legal order has succeeded in governing the behavior of the involved actors by keeping them away from regular courts. We argue that the ability of the order to offer what other governance modes could not is the key: FIFA, as a transnational private authority, offers harmonized institutions that apply across national borders and in many cases are better accustomed to the needs of the involved parties than their state-made alternatives, which often are based on one-size-fits-all approach and lack certainty of application. FIFA's rules increase the gains of clubs and prominent footballers. And while the interests of some other involved parties, less known players in particular, might have been better served by the application of formal state laws, the established equilibrium discourages deviation. The results contribute to the better understanding of alternative modes of supplying institutional design, particularly by illustrating how private orders function in the environment where reputation plays limited role.

Do Institutions Cause Social Trust? Evidence from an Institutional Reform

Denis Ivanov (National Research University Higher School of Econ)

Abstract : I attempt to disentangle a problem of causality between institutional quality and interpersonal trust using evidence from a natural experiment: mid-2000s institutional reforms in the post-Soviet nation of Georgia. The reforms following the 2003 Rose Revolution were swift and extensive, aiming mostly at combating corruption and organized crime, improving law enforcement and economic liberalization. At the same time, the neighboring nations of Armenia and Azerbaijan, both former Soviet republics with cultural and economic background similar to the Georgian one, experienced no such change, thus becoming credible counterfactuals to Georgia. To reduce unobservable heterogeneity between Georgia as a treatment group, and Armenia and Azerbaijan as a control group, I exploit the fact that republics borders during the Soviet era did not always reflected the settlement patterns of ethnic groups, thus creating a number of minorities separated from their ethnic kins by arbitrary borders that were internal within the USSR but have become international after the independence. In this particular case, Georgia has several districts with predominantly Armenian and Azeri population spanning along its border with Armenia and Azerbaijan. Comparing people of the same ethnic group on both sides of the border allows concentrating on differences in governance and formal institutions and to diminish possible confounding effect of culture-related heterogeneity. Applying regression discontinuity design to the data from Life in Transition and Caucasian Barometer surveys, I find that Armenian and Azeri residents of Georgia have greater level of interpersonal trust than their counterparts in Armenia and Azerbaijan. Perceptions of corruption and rule of law are likely channels of influence.

The Interaction of Individual Values and Sticky Formal Institutions in Economic Development

Judit Kapas (University of Debrecen)

Abstract : The aim of this paper is take a step towards further developing our understanding of how culture affects economic development, as suggested by Manski (2001). Attempting to follow his two propositions, (1) I have restricted my concern to a very specific question, namely the analysis of the possible interaction of individual values and sticky formal institutions in development; and (2) I have used “better” data, i.e. data based on a priori theorizing rather than on ad hoc survey questions. I have relied on the theoretical framework of institutional stickiness (Boettke et al. 2008) which suggests that individual values are embodied and crystallized in the stickiest formal institutions of a society, leading to a “stuck-together” phenomenon, acting as an additional factor in development. The empirical investigations have provided details as regards the interaction of values and institutions. More specifically, besides establishing that both values and sticky formal institutions are strong determinants of long-run income, I have found that the interaction of values and institutions in the long run reinforces the impact of values on development in the good-institution countries. Furthermore, better formal institutions increase the marginal income-increasing effect of those individual values that are favorable to development. These findings suggest that values have a genuinely unique role in development. The results seem to be very robust.

Governance Thresholds and Human Capital–growth Nexus

Ghulam Mustafa (Federal Urdu University, Pakistan)
Muhammad Khan (Université d’Orléans, Rue de Blois, Orléans Cedex)

Abstract : This paper contributes to the recent debate about the relationship between human capital, governance and economic growth. In particular, we try to analyze whether the growth effects of human capital depend upon the level of governance. We employ a large panel data set of 135 developed and emerging economies over the period 1996-2014. Using an innovative threshold model and system-GMM approach, we find that there is a threshold effect in human capital- growth nexus. Our findings show that the relationship between human capital and economic growth is non-existent up to a certain threshold level of governance, however, the relationship becomes positive and significant once the threshold level has been achieved. Therefore, better governance is complementary to make a productive use of human capital in achieving higher growth. Our results show that human capital – growth nexus is contingent on the level of governance, thus accumulation of human capital stock is effective in achieving higher economic growth and economic development.