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Institutional specialization

Author

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  • Guimaraes, Bernardo
  • Sheedy, Kevin D.

Abstract

This paper presents a theory of institutional specialization in which some countries uphold the rule of law while others choose extractive institutions, even when countries are ex-ante identical. The driving force of specialization is that for incumbents in each country, the first steps to the rule of law have the greatest cost. Good institutions require sharing power and rents, but in places where power is already shared broadly, each power base or branch of government underpinning institutions is individually less important and thus receives lower rents. Countries with diametrically opposed institutions have a symbiotic relationship in the world equilibrium. The transition from sail to steam-powered vessels in 19th-century trade provides suggestive evidence supporting the theory.

Suggested Citation

  • Guimaraes, Bernardo & Sheedy, Kevin D., 2024. "Institutional specialization," Journal of International Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:inecon:v:150:y:2024:i:c:s0022199624000485
    DOI: 10.1016/j.jinteco.2024.103924
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    Keywords

    Rule of law; Power sharing; International trade; Extractive institutions; Resource curse; Political economy;
    All these keywords.

    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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