IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

The formal and informal institutional framework of capital accumulation

  • Pierre-Guillaume Méon
  • Khalid Sekkat

This paper studies the impact of social trust and formal legal and institutional determinants of capital accumulation in a panel of countries. It reports that formal determinants and trust interact, and that the two are substitutes. Specifically, the marginal impact of formal legal institutions decreases with trust, and vice versa. These findings apply both to total investment and to its foreign component, foreign direct investment.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/149744/1/wp13036.pdf
File Function: wp13036
Download Restriction: no

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 13-036.

as
in new window

Length: 35 p.
Date of creation: 07 Oct 2013
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/149744
Contact details of provider: Postal:
CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles

Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Web page: http://difusion.ulb.ac.be
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Cultural Biases in Economic Exchange," NBER Working Papers 11005, National Bureau of Economic Research, Inc.
  2. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & Jürgen Schupp & Gert G. Wagner, 2002. "A Nation-Wide Laboratory: Examining Trust and Trustworthiness by Integrating Behavioral Experiments into Representative Surveys," Discussion Papers of DIW Berlin 319, DIW Berlin, German Institute for Economic Research.
  3. Christian Bjørnskov, 2010. "How does social trust lead to better governance? An attempt to separate electoral and bureaucratic mechanisms," Public Choice, Springer, vol. 144(1), pages 323-346, July.
  4. Samuel Bazzi & Michael A. Clemens, 2013. "Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 152-86, April.
  5. Paola Sapienza & Anna Toldra & Luigi Zingales, 2007. "Understanding Trust," NBER Working Papers 13387, National Bureau of Economic Research, Inc.
  6. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  7. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  8. Pierre Cahuc & Yann Algan, 2009. "Civic Virtue and Labor Markets Institutions," Post-Print hal-00395668, HAL.
  9. Pierre-Guillaume Méon & Khalid Sekkat, 2006. "Institutional quality and trade: which institutions? Which trade?," DULBEA Working Papers 06-06.RS, ULB -- Universite Libre de Bruxelles.
  10. Paul Collier & Marcel Fafchamps & Francis Teal & Stefan Dercon, 1999. "Contract flexibility and dispute resolution in African manufacturing," Economics Series Working Papers WPS/1999-20, University of Oxford, Department of Economics.
  11. Dearmon, Jacob & Grier, Kevin, 2009. "Trust and development," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 210-220, August.
  12. Johanna D'Hernoncourt & Pierre-Guillaume Méon, 2008. "The not so dark side of trust: does trust increase the size of the shadow economy?," Working Papers CEB 08-030, ULB -- Universite Libre de Bruxelles.
  13. Ashoka Mody & Krishna Srinivasan, 1998. "Japanese and United States Firms as Foreign Investors: Do they march to the same tune?," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 778-799, November.
  14. Safavian, Mehnaz & Sharma, Siddharth, 2007. "When do creditor rights work?," Policy Research Working Paper Series 4296, The World Bank.
  15. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
  16. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
  17. Williamson, Oliver E, 1993. "Calculativeness, Trust, and Economic Organization," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 453-86, April.
  18. Danny Quah, 1996. "Twin peaks : growth and convergence in models of distribution dynamics," LSE Research Online Documents on Economics 2278, London School of Economics and Political Science, LSE Library.
  19. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  20. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "Investor Protection and Corporate Governance," Working Paper 19455, Harvard University OpenScholar.
  21. Chen, Yongmin, 2000. "Promises, Trust, and Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 209-32, April.
  22. Dearmon, Jacob & Grier, Robin, 2011. "Trust and the accumulation of physical and human capital," European Journal of Political Economy, Elsevier, vol. 27(3), pages 507-519, September.
  23. Greenwood, Jeremy & Jovanovic, Boyan, 1988. "Financial Development, Growth, And The Distribution Of Income," Working Papers 88-12, C.V. Starr Center for Applied Economics, New York University.
  24. Rui Castro & Gian Luca Clementi & Glenn MacDonald, 2004. "Investor Protection, Optimal Incentives, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1131-1175.
  25. Magda Bianco & Tullio Jappelli & Marco Pagano, 2001. "Courts and Banks: Effects of Judicial Enforcement on Credit Markets," CSEF Working Papers 58, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Apr 2002.
  26. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  27. Bernd Hayo & Stefan Voigt, 2003. "Explaining de facto judicial independence," Law and Economics 0306001, EconWPA.
  28. CASTRO, Rui & CLEMENTI, Gian Luca & MACDONALD, Glenn, 2009. "Legal Institutions, Sectoral Heterogeneity, and Economic Development," Cahiers de recherche 2009-08, Universite de Montreal, Departement de sciences economiques.
  29. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Social Capital as Good Culture," Economics Working Papers ECO2007/57, European University Institute.
  30. Kinda, Tidiane, 2010. "Investment Climate and FDI in Developing Countries: Firm-Level Evidence," World Development, Elsevier, vol. 38(4), pages 498-513, April.
  31. Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
  32. Safavian, Mehnaz & Sharma, Siddharth, 2007. "When do creditor rights work?," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 484-508, September.
  33. Luc Laeven & Christopher Woodruff, 2007. "The Quality of the Legal System, Firm Ownership, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 601-614, November.
  34. Robert Cooter & Hans Bernd Schäfer, 2011. "The Secret of Growth Is Financing Secrets: Corporate Law and Growth Economics," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages S105 - S123.
  35. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1127-1170.
  36. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
  37. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  38. Utku Teksoz, 2008. "Trust in Transition: Cross-Country and Firm Evidence," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(2), pages 407-433, October.
  39. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Alfred Marshall Lecture Social Capital as Good Culture," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 295-320, 04-05.
  40. Ariane Lambert-Mogiliansky & Konstantin Sonin & Ekaterina Zhuravskaya, 2007. "Are Russian Commercial Courts Biased? Evidence from a Bankruptcy Law Transplant," Post-Print halshs-00754226, HAL.
  41. Dawson, Andrew, 2013. "The Social Determinants of the Rule of Law: A Comparison of Jamaica and Barbados," World Development, Elsevier, vol. 45(C), pages 314-324.
  42. Khalid Sekkat & Marie-Ange Veganzones, 2007. "Openness, investment climate and FDI in Developing countries," ULB Institutional Repository 2013/7370, ULB -- Universite Libre de Bruxelles.
  43. Pierre-Guillaume Méon & Khalid Sekkat, 2004. "Does the quality of institutions limit the MENA's integration in the world economy?," ULB Institutional Repository 2013/164576, ULB -- Universite Libre de Bruxelles.
  44. Ken Jackson, 2013. "Contract Enforceability and the Evolution of Social Capital," Journal of Law, Economics and Organization, Oxford University Press, vol. 29(1), pages 60-77, February.
  45. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  46. Voigt, Stefan & Gutmann, Jerg, 2013. "Turning cheap talk into economic growth: On the relationship between property rights and judicial independence," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 66-73.
  47. John F. Helliwell & Robert D. Putnam, 1995. "Economic Growth and Social Capital in Italy," Eastern Economic Journal, Eastern Economic Association, vol. 21(3), pages 295-307, Summer.
  48. Eberhardt, Markus & Teal, Francis, 2013. "Structural change and cross-country growth empirics," Policy Research Working Paper Series 6335, The World Bank.
  49. Annen, Kurt, 2013. "Social capital as a substitute for formality: Evidence from Bolivia," European Journal of Political Economy, Elsevier, vol. 31(C), pages 82-92.
  50. Sebnem Kalemli-Ozcan & Laura Alfaro & Vadym Volosovych, 2003. "Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation," Working Papers 2003-01, Department of Economics, University of Houston.
  51. Dani Rodrik, 2007. "Introductiion to One Economics, Many Recipes: Globalization, Institutions, and Economic Growth
    [One Economics, Many Recipes: Globalization, Institutions, and Economic Growth]
    ," Introductory Chapters, Princeton University Press.
  52. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
  53. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
  54. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  55. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
  56. Inglehart Ronald & Basañez Miguel & Díez-Madrano Jaime & Halman Loek & Luijkx Ruud, 2004. "Human Beliefs and Values," Books, Fundacion BBVA / BBVA Foundation, edition 0, number 201143.
  57. Claudia Williamson, 2009. "Informal institutions rule: institutional arrangements and economic performance," Public Choice, Springer, vol. 139(3), pages 371-387, June.
  58. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  59. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
  60. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
  61. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," ULB Institutional Repository 2013/7364, ULB -- Universite Libre de Bruxelles.
  62. Avinash Dixit, 2009. "Governance Institutions and Economic Activity," American Economic Review, American Economic Association, vol. 99(1), pages 5-24, March.
  63. Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 317-344, November.
  64. Steer, Liesbet & Sen, Kunal, 2010. "Formal and Informal Institutions in a Transition Economy: The Case of Vietnam," World Development, Elsevier, vol. 38(11), pages 1603-1615, November.
  65. Guido Tabellini, 2008. "Presidential Address Institutions and Culture," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 255-294, 04-05.
  66. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  67. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  68. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  69. Berggren, Niclas & Bjørnskov, Christian, 2009. "Is the Importance of Religion in Daily Life Related to Social Trust? Cross-Country and Cross-State Comparisons," Ratio Working Papers 142, The Ratio Institute.
  70. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
  71. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:2013/149744. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.