IDEAS home Printed from
   My bibliography  Save this paper

Institutions and the East Asian miracle : asymmetric information, rent - seeking, and the deliberation council


  • Campos, Jose Edgardo
  • Lien, Donald
  • DEC


North (1984) argues that it is not the cost of transport but the cost of transactions that prevents economies from realizing well-being - and that institutions matter because they affect the costs of transactions. The authors analyze the role of the deliberation council - an institution common to most of the high performing Asian economies - in reducing the crippling effect of rent-seeking. A deliberation council is a consultative committee whose members include high-ranking government officials and representatives from the private sector - usually from industry (especially high business) and academia, sometimes from consumer groups and labor. Councils can be organized by industry or sector (as with the Industrial Structure Council of Japan) or by theme or function (as with Thailand's Joint Public Sector-Private Sector Consultative Committee). Generally, the deliberation council has a quasi-legislative authority, and policies cannot be introduced or changed without its recommendation and approval. Unlike a legislative committee, its private sector reprensentatives are not elected but are chosen (by industry or labor, for example, and not necessarily through voting) and its government officials generally become representatives by virtue of appointment to their present position. The authors construct a two-stage incomplete information game model with two identical firms and various links to real-world processes. It is a highly simplified model that focuses on the awarding of government contracts. They use the model to gain insight into the problem of rent-seeking in developing countries and to test their hypothesis. Rent-seeking occurs partly because people are uncertain about the intentions and plans of potential competitors - they engage in rent-seeking for fear that not doing so might give their competitors a huge advantage. To the extent that the council generates an exchange of information, this uncertainty is reduced, so one would expect less rent-seeking. Such exchanges reduce information (transaction) costs and thus improve efficiency. The model confirms that firms are better off it they can communicate their true valuations to competitors than when they cannot. The deliberation council induces participation to reveal true information, and the model shows that the payoffs are better with communication than without.

Suggested Citation

  • Campos, Jose Edgardo & Lien, Donald & DEC, 1994. "Institutions and the East Asian miracle : asymmetric information, rent - seeking, and the deliberation council," Policy Research Working Paper Series 1321, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1321

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, March.
    2. Deepak Lal, 1993. "Poverty and Development," UCLA Economics Working Papers 707, UCLA Department of Economics.
    3. 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.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Lance L.P. Gore, 2014. "Labour Management as Development of the Integrated Developmental State in China," New Political Economy, Taylor & Francis Journals, vol. 19(2), pages 302-327, March.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1321. 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: (Roula I. Yazigi). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.