Institutions and Political Instability in Kenya: Measurement and Tests of Institutional Persistence and Interdependence

Abstract: Criticisms levied against the conventional measures of institutions and the assumption that institutions are persistent often made explicitly or implicitly in institution-development debates, calls for the construction of new alternative indicators of institutions that can be used to either validate or refute these criticisms, and to test empirically the assumption that institutions are persistent. In this paper, we present a new database for indicators of Political Institutions and Economic Institutions for Kenya for the period 1880 to 2010. These de-jure indicators are constructed from formal legislature governing immovable property to capture permanency characteristic of institutions implied in the influential works of Douglas North. We then correlate these indicators with the conventional indicators of institutions for the time period for which these conventional indicators are available. The results from these correlations show high correlations, which signal some efficacy of our newly constructed indicators. We use our newly constructed indicators to empirically test the assumption that institutions are persistent. Our results validate this theoretical assumption. We perform the first application of our institutional indicators by looking at the interdependence among them and their interdependence with social economic indicators. Our results reveal a significant level of institutional interdependence as well as their positive interdependence with socio-economic indicators. The implication of the results is that institutions do explain the process of economic development in Kenya. This paper contributes to the institutions-development debates by empirically testing the assumption that institutions are persistent