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Institutions, trade, and social cohesion in fragile states: Implications for policy conditionality and aid allocation

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  • Baliamoune-Lutz, Mina

Abstract

This paper examines the effects of political institutions, openness to trade, and social cohesion on development in fragile states. The empirical results indicate that beyond a certain level, openness to trade may actually be harmful to income, particularly in countries with high export concentration. Starting from low levels of political institutional quality, small improvements in polity can have adverse effects. On the other hand, social cohesion has a positive effect once a threshold level is reached. The results associated with the influence of political institutions and openness to trade seem to suggest the possibility of a 'catch-22', at least in the short run. If a fragile state tries to improve its political institutions or its openness to trade it may wind up with lower per-capita income. These findings have important policy implications with regard to IDA's policy conditionality and aid allocation.

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  • Baliamoune-Lutz, Mina, 2009. "Institutions, trade, and social cohesion in fragile states: Implications for policy conditionality and aid allocation," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 877-890, November.
    • Handle: RePEc:eee:jpolmo:v:31:y:2009:i:6:p:877-890
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    2. Bertocchi, Graziella, 2011. "Growth, Colonization, and Institutional Development: In and Out of Africa," IZA Discussion Papers 5856, Institute of Labor Economics (IZA).
    3. Morgan Bazilian & Debabrata Chattopadhyay, 2015. "Considering Power System Planning in Fragile and Conflict States," Cambridge Working Papers in Economics 1530, Faculty of Economics, University of Cambridge.
    4. Baliamoune-Lutz, Mina, 2011. "Trust-based social capital, institutions, and development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 335-346, August.
    5. Oasis Kodila-Tedika & Remy Bolito-Losembe, 2014. "Corruption et Etats fragiles africains," African Development Review, African Development Bank, vol. 26(1), pages 50-58.
    6. Mina Baliamoune-Lutz, 2012. "Do Institutions And Social Cohesion Enhance The Effectiveness Of Aid? New Evidence From Africa," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-19.
    7. Oasis Kodila-Tedika & Asongu Simplice, 2016. "State fragility, rent seeking and lobbying: evidence from African data," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 43(10), pages 1016-1030, October.
    8. Zaouali, Amira, 2014. "Terms of Trade Instability, Economic Vulnerability and Economic Growth: The Role Of Institutions in Sub-Saharan Africa," MPRA Paper 52939, University Library of Munich, Germany.
    9. Graziella Bertocchi & Andrea Guerzoni, 2010. "Growth, History, or Institutions? What Explains State Fragility in Sub-Saharan Africa," Center for Economic Research (RECent) 044, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    10. Danquah, M. & Ouattara, B., 2023. "Aid and social cohesion," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 118-131.
    11. Charles Shaaba Saba & Nicholas Ngepah, 2019. "A cross-regional analysis of military expenditure, state fragility and economic growth in Africa," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 2885-2915, November.
    12. Buitrago R., Ricardo E. & Barbosa Camargo, María Inés, 2021. "Institutions, institutional quality, and international competitiveness: Review and examination of future research directions," Journal of Business Research, Elsevier, vol. 128(C), pages 423-435.
    13. Sana Zaouali & Amira Zaouali, 2015. "Terms of Trade Instability, Economic Vulnerability and Economic Growth: The Role of Institutions in Sub-Saharan Africa," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(4), pages 579-590, April.
    14. Ozili, Peterson K, 2020. "Social inclusion and financial inclusion: international evidence," MPRA Paper 101811, University Library of Munich, Germany.
    15. Mina Baliamoune-Lutz, 2011. "Growth by Destination (Where You Export Matters): Trade with China and Growth in African Countries," African Development Review, African Development Bank, vol. 23(2), pages 202-218.
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    17. Ahmad, Mahyudin & Hall, Stephen G., 2014. "Explaining social capital effects on growth and property rights via trust-alternative variables," MPRA Paper 58358, University Library of Munich, Germany.

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