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Regulation, Trust, and Cronyism in Middle Eastern Societies: The Simple Economics of 'Wasta'

Author

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  • Barnett, Andy

    (Auburn University)

  • Yandle, Bruce

    (Clemson University)

  • Naufal, George S

    (Texas A&M University)

Abstract

Despite being a fixture of everyday life in the Arab world, wasta, which may be thought of as special influence by members of the same group or tribe, has received little attention from social scientists. Our casual empiricism suggests that wasta is an important determinant of how economic activities are organized and resources are allocated in Middle Eastern societies, yet economists, even those who specialize in work related to the Middle East, have not addressed the issue of wasta. With this paper we provide a modest beginning to filling that void. Specifically, we use the history of wasta, Hayek's concept of extended order and Coase's work on the nature of the firm to draw inferences regarding the existence of wasta and its persistence in Arab societies.

Suggested Citation

  • Barnett, Andy & Yandle, Bruce & Naufal, George S, 2013. "Regulation, Trust, and Cronyism in Middle Eastern Societies: The Simple Economics of 'Wasta'," IZA Discussion Papers 7201, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7201
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    References listed on IDEAS

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    1. Ahmed Amin Mohamed & Hadia Hamdy, 2008. "The Stigma of Wasta: The Effect of Wasta on Perceived Competence and Morality," Working Papers 5, The German University in Cairo, Faculty of Management Technology.
    2. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, January.
    3. Lipford, Jody W. & Yandle, Bruce, 2009. "The determinants of purposeful voluntarism," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 72-79, January.
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    7. Dombrowsky, Ines & Hägele, Ramona & Behrenbeck, Lukas & Bollwein, Thomas & Köder, Mirjana & Oberhauser, Daniel & Schamberger, Ronja & Al-Naber, Majd & Al-Raggad, Marwan & Salameh, Elias, 2022. "Natural resource governance in light of the 2030 Agenda: The case of competition for groundwater in Azraq, Jordan," IDOS Studies, German Institute of Development and Sustainability (IDOS), volume 106, number 106, July.
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    9. Berger, Ron & Silbiger, Avi & Herstein, Ram & Barnes, Bradley R., 2015. "Analyzing business-to-business relationships in an Arab context," Journal of World Business, Elsevier, vol. 50(3), pages 454-464.
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    12. Naeem A. Albihany & Abdullah M. Aljarodi, 2024. "The role of personal connections Wasta on early-stage entrepreneurial orientations: empirical evidence from Saudi Arabia," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    13. Hearn, Bruce & Oxelheim, Lars & Randøy, Trond, 2021. "The Impact of Founders on Information Asymmetry vis-à-vis Outside Investors: Evidence from Caribbean Offshore Tax Havens," Working Paper Series 1419, Research Institute of Industrial Economics.
    14. Williams Colin C. & Yang Junhong, 2017. "Evaluating the Use of Personal Networks to Circumvent Formal Processes: A Case Study of Vruzki in Bulgaria," South East European Journal of Economics and Business, Sciendo, vol. 12(1), pages 57-67, April.
    15. C. Williams, Colin & Bezeredi, Slavko, 2017. "Evaluating The Use Of Personal Connections To Bypass Formal Procedures: A Study Of Vrski In Republic Of Macedonia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 8(2), pages 169-182.
    16. Moustafa, Khaled, 2018. "Promoting an academic culture in the Arab world," arabixiv.org bcp5f, Center for Open Science.
    17. Zhang, Man & Hartley, Janet L. & AL-Husan, Faten Baddar & ALHussan, Fawaz Baddar, 2021. "Informal interorganizational business relationships and customer loyalty: Comparing Guanxi, Yongo, and Wasta," International Business Review, Elsevier, vol. 30(3).
    18. Bénédicte Coestier, 2015. "Jordan and the Middle-Income Growth Trap: Arab Springs and Institutional Changes," EconomiX Working Papers 2015-8, University of Paris Nanterre, EconomiX.

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    More about this item

    Keywords

    Middle East; Coase; Hayek; firm; wasta; cronyism; social capital;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East

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