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

Author

Listed:
  • 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, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp7201
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    References listed on IDEAS

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    1. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, August.
    2. 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.
    3. 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.
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    1. Arwa Al-Twal & Mohammad Alawamleh & Doaa M. F. Jarrar, 2024. "An investigation of the role of Wasta social capital in enhancing employee loyalty and innovation in organizations," Journal of Innovation and Entrepreneurship, Springer, vol. 13(1), pages 1-13, December.
    2. Obeidat, Zaid Mohammad & Xiao, Sarah Hong & Qasem, Zainah al & dweeri, Rami al & Obeidat, Ahmad, 2018. "Social media revenge: A typology of online consumer revenge," Journal of Retailing and Consumer Services, Elsevier, vol. 45(C), pages 239-255.
    3. Hearn, Bruce & Oxelheim, Lars & Randøy, Trond, 2020. "The Impact of Indigenous Culture and Business Group Affiliation on Corporate Governance of African Firms," Working Paper Series 1360, Research Institute of Industrial Economics.
    4. Nivine H. Abbas & Irna Van der Molen & Manal R. Nader & Jon C. Lovett, 2013. "Perceptions from the Public and Private Sector on Trust and Cooperation in the Field of Environmental Management in Lebanon," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 2, October.
    5. Shaikha Khalfan, 2024. "Wasta in business management: a critical review of recent developments and future trends in the tourism sector," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    6. University of Gothenburg, 2017. "Governance in Service Delivery in the Middle East and North Africa," World Bank Publications - Reports 26201, The World Bank Group.
    7. Dowling, Michael & Vanwalleghem, Dieter, 2018. "Gulf Cooperation Council cross-border M&A: Institutional determinants of target nation selection," Research in International Business and Finance, Elsevier, vol. 46(C), pages 471-489.
    8. Matthew Groh & David McKenzie & Nour Shammout & Tara Vishwanath, 2015. "Testing the importance of search frictions and matching through a randomized experiment in Jordan," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-20, December.
    9. 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, January.
    10. Hany Abdel-Latif & Hassan Aly, 2019. "Are politically connected firms turtles or gazelles? Evidence from the Egyptian uprising," Working Papers 1304, Economic Research Forum, revised 2019.
    11. 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.
    12. Abu Elnasr E. Sobaih & Ahmed E. Abu Elnasr, 2023. "Local versus Foreign Worker Perceptions, Commitment and Attitudes toward Careers in Restaurants and Cafés: Evidence from Saudi Arabia," Sustainability, MDPI, vol. 15(6), pages 1-19, March.
    13. Osman, Adam & Speer, Jamin D. & Weaver, Andrew, 2022. "Connections, Referrals, and Hiring Outcomes: Evidence from an Egyptian Establishment Survey," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 342-355.
    14. Naeem A. Albihany & Abdullah M. Aljarodi, 2024. "The role of personal connections Wasta on early-stage entrepreneurial orientations: empirical evidence from Saudi Arabia," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    15. 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.
    16. 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.
    17. Colin C. Williams & Slavko Bezeredi, 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.
    18. Moustafa, Khaled, 2018. "Promoting an academic culture in the Arab world," arabixiv.org bcp5f, Center for Open Science.
    19. 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).
    20. Kittur, Prathamesh & Agarwal, Shailja, 2024. "Cultural bridges in Business: Critical review and future directions in cross-cultural B2B relationships," Journal of Business Research, Elsevier, vol. 180(C).
    21. 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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    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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