Can foreign aid motivate institutional reform? An evaluation of the HIPC Initiative

2017 ◽  
Vol 6 (2) ◽  
pp. 242-258 ◽  
Author(s):  
Minh Tam Schlosky ◽  
Andrew Young
Keyword(s):  
Foreign Aid ◽  
Developing Economies ◽  
Poor Country ◽  
Civil Liberties ◽  
Institutional Reform ◽  
Institutional Quality ◽  
Entrepreneurial Activity ◽  
Content Type ◽  
Hipc Initiative

Purpose A number of political economy concerns are associated with the provision of foreign aid to developing economies. These concerns suggest that foreign aid is likely to have harmful effects on a recipient’s institutional quality, and that attempts to give aid conditional on policy and institutional reforms are unlikely to succeed. Established in 1996, the Heavily Indebted Poor Country (HIPC) Initiative is a comprehensive, structured attempt to provide multilateral foreign aid conditional on reforms in recipient countries. The purpose of this paper is to evaluate its effectiveness at affecting institutional reform in participating countries. Design/methodology/approach The authors document how participating countries fared in terms of the quality of their policies and institutions. The authors employ the Fraser Institute’s Economic Freedom of the World index as a measure of economic institutions, and the Freedom House political rights (PR) and civil liberties indices as measures of PR and protections. Based on these measures, the authors report unconditional statistics (e.g. average changes) and also regressions of changes in the measures on HIPC Initiative aid allocations and other controls. Findings The authors find that most participating countries experienced either meager increases or outright decreases in institutional quality. The regression results provide no evidence that the Initiative affects meaningful reforms. Originality/value The potential for foreign aid to have deleterious effects on the institutional quality of recipient countries has been of increasing concern to students of economic development. Such effects can have important implications for entrepreneurial activity in these countries. The HIPC Initiative is specifically designed to acknowledge and, indeed, overcome these concerns, leading to actual increases in institutional quality of recipient countries. To the authors’ knowledge, this work is the first to assess whether the promise of the HIPC Initiative is being fulfilled.

scholarly journals The Interconnectedness between Institutional Quality, Civil War and Institutional Reform: A Case Study of Nepalese Maoist Civil War

2021 ◽  
Vol 11 (3) ◽  
pp. 59-70
Author(s):  
Saroj Kumar Aryal
Keyword(s):  
Civil War ◽  
Political Development ◽  
Institutional Reform ◽  
Institutional Quality ◽  
Primary Objective ◽  
Institutional Reforms ◽  
Secondary Sources ◽  
Made In

Various factors trigger civil war, depending on the society and stages of political development. But analyzing it through the quality of an institution or some provisions of institutions may lead to a possible cause of a civil war. Thus, the primary objective of this article is to investigate institutional quality and its role in triggering a civil war. This paper argues that there is interconnectedness between institutional quality, civil war, and institutional reforms, which occurs as a series of events. Although the article provides many examples, in the second section, the case study of Nepalese decade-long civil war and post-civil war institutional reform has been presented to back the argument made in the paper. By discussing various dynamics of historical institutionalism, the paper mainly analyzes the primary and secondary sources.

Local institutions in Peru and the presence and number of fast-food outlets

2017 ◽  
Vol 15 (3) ◽  
pp. 338-376
Author(s):  
Esteban Colla-De-Robertis ◽  
Sandro Navarro Castañeda
Keyword(s):  
Principal Component Analysis ◽  
Urban Development ◽  
Fast Food ◽  
Institutional Quality ◽  
Principal Component ◽  
Local Institutions ◽  
Urban District ◽  
Content Type ◽  
Food Outlets

Purpose The paper aims to study the role of local institutions in the establishment of fast-food outlets in urban districts of Peru. In most urban districts, there are no fast-food outlets. The authors, therefore, study the effect of institutional quality on the presence or absence of these outlets and the number of outlets if these are present. Design/methodology/approach The theoretical framework in which this paper is based on is the theory of agglomeration, which establishes that firms benefit from being close to each other. In particular, the paper builds on a model of market entry and competition in geographically independent local markets. An explicit expression was found for the equilibrium number of outlets (including zero) as a function of exogenous determinants of the demand for fast-food in each market, available infrastructure and institutional quality of the district’s government. Principal component analysis was used to construct measures of institutional quality based on administrative and organizational characteristics of district’s municipalities. These measures were incorporated as explanatory variables in a zero-inflated Poisson model, which is appropriate to handle count data and to accommodate excess zeros and which also allows the specification of different models for the zero part and the positive part. Findings Institutional quality mainly affects the presence of fast-food outlets in a district. The quality of urban development management and use of information systems are relevant. An institutional variable particularly relevant in explaining the number of outlets is the presence of an investment programming office in the municipality. The authors confirm the general hypothesis of the paper: institutions have a role in explaining both the presence and number of fast-food outlets in a district. Overall, the results of this paper suggest that institutional quality of a municipal district is related to better infrastructure, which lowers the costs of establishing outlets. Research limitations/implications Limitations in the availability of data at the regional and urban district level did not allow the authors to analyze other factors that affect entry decisions in the fast-food industry in Peru, such as controls to prevent corruption, legal uncertainty or crime. Another limitation was the lack of data on entry costs for each franchisee in each urban district. This forced the authors to use public infrastructure characteristics of the district as (imperfect) proxies of the entry costs. Practical implications The instruments of urban development management and information systems can be effective at attracting investment to a district. These tools operate partly through an indirect effect, namely, the improvement of district infrastructure, which is necessary to reduce the costs of establishing companies. There is also synergy between national government’s programs to attract investment and the good institutional quality in local governments. On the contrary, poor local institutions can be an obstacle to the successful implementation of those national programs. Social implications Foreign direct investment has a positive impact on the economic development of a country through knowledge spillovers. Therefore, any administrative reform to make local government practices more efficient can have an indirect impact on development. Originality/value Principal component analysis is a statistical tool that can be important in building good measures of institutional quality by allowing the combination of different observable characteristics into one component that can be interpreted as an operational restriction. The count model allows the use of the primary, easily observable, dependent variable, namely, the number of outlets. Finally, the two-part model makes it possible to discern the effect of institutional quality on the presence or absence of outlets and the number of outlets if these are present.

Determinants of health and education equality: evidence from post-Soviet states

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Angelo Vito Panaro
Keyword(s):  
Civil Society ◽  
Social Policy ◽  
Civil Liberties ◽  
Regime Type ◽  
Social Equality ◽  
Cross Sectional ◽  
Content Type ◽  
Civil Society Organisations ◽  
Regime Types

PurposeThis article examines the determinants of social equality in the education and healthcare sectors in the 15 post-Soviet states. Focussing on regime type and civil society organisations (CSOs), it argues that countries where liberal principles of democracy are achieved or have a stronger civil society deliver a more equitable social policy.Design/methodology/approachThe empirical analysis rests upon a time-series cross-sectional (TSCS) analysis from 1992 to 2019. Data are collected from the Quality of Government (QoG) Dataset 2020 and the Variates of Democracy (V-DEM) Dataset 2020.FindingsThe findings demonstrate that while regime type only partially accounts for social equality, as electoral autocracies do not have more equitable social policy than close regime types and democracy weakly explains equality levels, the strength of CSOs is associated with more equality.Originality/valueThe article challenges dominant approaches that consider electoral democracy to be related to more equal social policy and demonstrates that de-facto free and fair elections do not impinge on social equality, while the strength of liberal and civil liberties and CSOs correlate with more equitable social policy.

DOES FOREIGN AID HELP OR HINDER THE INSTITUTIONAL QUALITY OF THE RECIPIENT COUNTRY? NEW EVIDENCE FROM THE OIC COUNTRIES

2019 ◽  
pp. 1-30
Author(s):  
MOHAMMAD ASHRAFUL FERDOUS CHOWDHURY ◽  
MOHAMED ARIFF ◽  
MANSUR MASIH ◽  
IZLIN ISMAIL
Keyword(s):  
Quantile Regression ◽  
Foreign Aid ◽  
Negative Impact ◽  
Recipient Country ◽  
Institutional Quality ◽  
Institutional Development ◽  
Average Period ◽  
The Impact ◽  
New Evidence

This study examines the impact of foreign aid on the institutional quality (IQ) of the OIC countries. Using the data of OIC countries for the three-year average period from 1991 to 2016, the system GMM finds that aid in general deteriorates the IQ for the aid recipient countries. However, quantile regression suggests that the negative impact of foreign aid on institutional quality (IQ) is relatively greater in the countries where the existing quality of institution is poor. The findings of the study suggest that improving the existing capacity is essential for reaping the optimum benefit of foreign aid on institutional development.

Sectoral analysis of productivity in the developing and developed economies of Asia-Pacific

2019 ◽  
Vol 13 (1) ◽  
pp. 37-71
Author(s):  
Pami Dua ◽  
Niti Khandelwal Garg
Keyword(s):  
Technological Progress ◽  
Developing Economies ◽  
Trade Openness ◽  
Institutional Quality ◽  
Asia Pacific ◽  
Government Size ◽  
Financial Openness ◽  
Content Type ◽  
Developed Economies ◽  
The Impact

Purpose The study aims to empirically investigate the trends and determinants of labour productivity of the two broad sectors –industry and services – and their components, namely, manufacturing and market services sectors, in the case of major developing and developed economies of Asia-Pacific over the period 1980-2014 and make a comparison thereof. Design/methodology/approach The study uses econometric methodology of panel unit root tests, panel cointegration and group-mean full modified ordinary least squares (FMOLS). Findings The study finds that while capital deepening, government size, institutional quality, productivity of the other sector and financial openness affect productivity of all the sectors significantly, the impact of human capital and trade openness varies across sectors in the case of developing economies. Furthermore, the impact of technological progress becomes significant in the post-liberalization reforms period in the developing economies. The study further finds that capital deepening, human capital, government size, institutional quality, productivity of the other sector, government size and trade openness are significant determinants of productivity of all sectors of developed economies under consideration. However, the impact of technological progress is stronger for manufacturing sector than services and its components. Furthermore, while both equity and debt liabilities (as measures of financial openness) influence sectoral productivity of industry and manufacturing sectors positively and significantly in case of developed economies, only equity liabilities have a significant influence on the productivity of developing economies. This may indicate existence of more developed financial markets in the case of developed economies. Originality/value The study identifies important structural differences in determinants of productivity both across sectors and across developing and developed economies of Asia-Pacific.

scholarly journals Governance quality, foreign direct investment, and entrepreneurship in emerging markets

2019 ◽  
Vol 26 (2) ◽  
pp. 238-264
Author(s):  
Nam Hoai Tran ◽  
Chi Dat Le
Keyword(s):  
Emerging Economies ◽  
Institutional Context ◽  
Emerging Countries ◽  
Entrepreneurial Activity ◽  
Outward Fdi ◽  
Content Type ◽  
Necessity Entrepreneurship ◽  
Governance Quality ◽  
The Relationship

Purpose The purpose of this paper is to thoroughly investigate the interplay between institutions, foreign direct investment (FDI) and entrepreneurship in the context of emerging markets (EMs). Design/methodology/approach The authors argue that the impact of FDI on entrepreneurial activity depends on different natures of capital flow and entrepreneurial motivation and relates to the quality of institutional environment. First, the roles of inward and outward FDI are examined in connection with the new firm creation by opportunity- and necessity-motivated entrepreneurs. Second, the integrated influences of (inward/outward) FDI and governance quality (GQ) on (opportunity/necessity) entrepreneurship are tested. This nexus of relationships is analyzed through segmented regressions using the GEM data of 39 EMs over the 2004–2015 period. Findings It is evidenced that the quality of governance infrastructure affects the relationship between FDI and entrepreneurship: in emerging countries with low GQ, opportunity entrepreneurship is stimulated by inward FDI and diminished by outward FDI; and in emerging countries with high GQ, necessity entrepreneurship is discouraged by inward FDI and promoted by outward FDI. Practical implications This research has implications for the institutional context-based execution of public policy in emerging economies. As the entrepreneurial effects of inward and outward FDI are pronounced differently under the two types of entrepreneurship and the two extremes of GQ, public policy makers who recognize the catalytic role of FDI in domestic business development should take the distinct institutional context of their country into consideration. Originality/value The paper contributes to the extant literature on international entrepreneurship in emerging economies by making a breakdown on the roles played by different types of FDI in the entrepreneurial activity, analyzing the mediating effects of GQ on the relationship between inward/outward FDI and entrepreneurship, and interpreting the capital and institutional determinants of entrepreneurship in terms of entrepreneurial motivations by opportunity and necessity.

scholarly journals Institutional benchmarking of foreign aid effectiveness in Africa

2015 ◽  
Vol 42 (6) ◽  
pp. 543-565 ◽  
Author(s):  
Simplice A. Asongu
Keyword(s):  
Foreign Aid ◽  
Development Assistance ◽  
Institutional Quality ◽  
Political Stability ◽  
Institutional Development ◽  
African Countries ◽  
Content Type ◽  
Institutional Dynamics ◽  
Government Quality ◽  
Institutional Benefits

Purpose – The purpose of this paper is to integrate two main strands of the aid-development nexus in assessing whether institutional thresholds matter in the effectiveness of foreign-aid on institutional development in 53 African countries over the period 1996-2010. Design/methodology/approach – The panel quantile regression technique enables us to investigate if the relationship between institutional dynamics and development assistance differs throughout the distributions of institutional dynamics. Eight government quality indicators are employed: rule of law, regulation quality, government effectiveness, corruption, voice and accountability, control of corruption, political stability and democracy. Findings – Three hypotheses are tested and the following findings are established: first, institutional benefits of foreign-aid are contingent on existing institutional levels in Africa; second, but for a thin exception (democracy), foreign-aid is more negatively correlated with countries of higher institutional quality than with those of lower quality; third, the institutional benefits of foreign-aid are not questionable until greater domestic institutional development has taken place. The reverse is true instead. government quality benefits of development assistance are questionable in African countries irrespective of prevailing institutional quality levels. Originality/value – This paper contributes to existing literature on the effectiveness of foreign-aid by focussing on the distribution of the dependent variables (institutional dynamics). It is likely that best and worst countries in terms of institutions respond differently to development assistance.

scholarly journals Caveat Emptor: Foreign Aid and Entrepreneurship

Economies ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 4 ◽  
Author(s):  
Tomi Ovaska ◽  
Ryo Takashima
Keyword(s):  
Foreign Aid ◽  
Institutional Quality ◽  
Development Aid ◽  
Economic Outcomes ◽  
Caveat Emptor ◽  
Development Partner

In the last 60 years, the results of development aid have been mixed. Thus far, it has been mostly the aid recipient countries, which have been held responsible for aid’s shortcomings. That focus is misplaced, however, since the donor countries, through development aid, also export some of their own institutions and values to the recipient countries affecting the recipients’ rate of entrepreneurship and income. This study demonstrates how donor countries vary widely in both the type and quality of their institutions and values, leading to diverging economic outcomes. The results indicate that recipient countries should pay serious attention to who their development partner is. In particular, recipients would want to avoid aid from low institutional quality donors with perceived anti-market attitudes. Finally, it is argued that development aid might become more efficient if it moved away from the bilateral, towards the multilateral, mode.

Institutions and entrepreneurship: the mediating role of corruption

2017 ◽  
Vol 13 (3) ◽  
pp. 262-282 ◽  
Author(s):  
Mohsen Mohammadi Khyareh
Keyword(s):  
Direct Effect ◽  
Rule Of Law ◽  
Institutional Quality ◽  
Test Theory ◽  
Entrepreneurial Activity ◽  
Content Type ◽  
Mediating Role ◽  
Mediation Hypothesis ◽  
The Relationship

Purpose The purpose of this paper is to examine the mediating role of corruption in the relationship between entrepreneurship and institutional quality in a sample of 90 countries from all around the world. Design/methodology/approach The data were collected from the Global Entrepreneurship Monitor, which developed a model where Corruption Perception Index as a proxy for corruption mediates the relationship between the variable rule of law as a proxy for institutional quality and opportunity entrepreneurship as a proxy for productive entrepreneurship. Correlation, Baron and Kenny approach (causal steps approach) and PROCESS Macro (normal test theory) developed by Hayes were used to find out the direct and indirect effects of institutional quality between corruption and entrepreneurship. Findings The bootstrap mediation results indicated that institutional quality was a significant predictor of corruption and corruption was a significant predictor of entrepreneurship. These findings support the mediation hypothesis. In addition, findings showed that there is a negative relation between corruption and productive entrepreneurship and a positive relation between institutional quality and productive entrepreneurship. Research limitations/implications The current study only considered the single proxy for institutional quality, i.e. rule of law; therefore, some other proxies for institutional quality such as government effectiveness and doing business can be used for future studies. Moreover, the proposed model does not control for the country differences like GDP or development stages of countries. Practical implications The findings of this study indicate that the total association between institutional quality and entrepreneurship is not only direct but also that rule of law contributes to levels of entrepreneurship through reduced levels of corruption. As a result, countries with higher levels of rule of law tended to experience corruption at lower levels, which in turn contributed to the emergence of increased levels of entrepreneurship. Furthermore, these results may be beneficial for organizations fighting against corruption, because entrepreneurial activity can be add to the group of economical drivers constrained by corruption. It is also beneficial for policy makers who focus on promoting entrepreneurship, since one way to increase entrepreneurial activity is to lower the existing corruption level. Originality/value The results indicated that the direct effect of institutional quality on the entrepreneurship remained significant when controlling for corruption, thus suggesting partial mediation. In other words, corruption only mediates part of the effect of institutional quality on entrepreneurship, that is, the intervention (institutional quality) has some residual direct effect even after the mediator (corruption) was introduced into the model.

scholarly journals Economic growth and quality of institutions in 27 postsocialist economies

2020 ◽  
Vol 47 (4) ◽  
pp. 769-787
Author(s):  
Constantinos Alexiou ◽  
Sofoklis Vogiazas ◽  
Nikita Solovev
Keyword(s):  
Economic Growth ◽  
Panel Cointegration ◽  
Institutional Quality ◽  
Supporting Evidence ◽  
Causality Analysis ◽  
Content Type ◽  
Long Run ◽  
Quality Of Institutions ◽  
The Relationship

PurposeThe relationship between institutional quality and economic growth is revisited.Design/methodology/approachA panel cointegration methodology and causality analysis are applied to 27 postsocialist economies over the period from 1996 to 2016.FindingsUtilizing the Worldwide Governance Indicators as a means of assessing the quality of institutions, it is found that in the long run, economic growth is positively associated with the rule of law and voice and accountability. In the short run, regulatory quality retains a positive effect, but voice and accountability demonstrate a puzzling negative effect on economic growth that merits further analysis. In exploring the causal dimension of our variables, supporting evidence of the strong links between the quality of institutions and economic growth is provided, hence rendering robust results.Originality/valueTo the best of the authors’ knowledge, it is the first time that an ARDL methodological framework, which addresses potential endogeneity issues, is used to investigate the relationship between institutional quality and growth in the context of postsocialist economies.

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