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Institutional Quality and Growth

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  • FABIEN NGENDAKURIYO

Abstract

We analyze the dynamic interaction between civil society organizations and Government in a representative developing economy. Government favors corruption and so fails to build efficient institutions. On its side, civil society exerts pressure on Government to constrain it to halt corruption. We distinguish between an authoritarian Government and an unrestrictive one: the latter does not repress society's protests while the former implements punishment mechanisms. We demonstrate analytically the existence of a unique stable equilibrium by solving a linear quadratic differential game for three Regimes respectively the optimal control problem, noncooperative and cooperative games. Numerical assessment indicates that civil monitoring always increases as corruption increases, but civil monitoring is low and institutions improve much faster under cooperation. Furthermore, total factor Productivity effects always dominate the detrimental effect of civil monitoring on growth in the first regime, under some restrictions in the second and never in the third. In response to a change in the government's aversion to rent variations in the presence of authoritarian government, total factor productivity effects always dominate under both the noncooperative and cooperative scenario.
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Suggested Citation

  • Fabien Ngendakuriyo, 2013. "Institutional Quality and Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(1), pages 157-183, February.
    • Handle: RePEc:bla:jpbect:v:15:y:2013:i:1:p:157-183
    DOI: jpet.12013
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    Cited by:

    1. Ngendakuriyo, Fabien & Zaccour, Georges, 2017. "Should civil society organizations cooperate or compete in fighting a corrupt government?," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 30-36.
    2. Ngendakuriyo, Fabien & Zaccour, Georges, 2013. "Fighting corruption: To precommit or not?," Economics Letters, Elsevier, vol. 120(2), pages 149-154.
    3. Chang, Chong-Chuo, 2023. "The impact of quality of institutions on firm performance: A global analysis," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 694-716.
    4. Fuentes, Raúl & Mishra, Tapas & Scavia, Javier & Parhi, Mamata, 2014. "On optimal long-term relationship between TFP, institutions, and income inequality under embodied technical progress," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 89-100.
    5. Ni, Niannian & Liu, Yulin & Zhou, Hui, 2022. "Financial openness, capital rents and income inequality," European Journal of Political Economy, Elsevier, vol. 71(C).

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