Culture and government : an analysis of the interaction between formal and informal institutions

• Main Author: Jackson, Kenneth
• Language: English
• Published: University of British Columbia 2010
• Online Access: http://hdl.handle.net/2429/27094

Institutions are the key to economic development. While the community of development economists appear to have converged on this assessment, our understanding of the specific role of institutions remains extremely limited. In particular, economists have avoided the question of how government institutions interact with cultural factors that vary around the world. The three papers in this thesis address this question with respect to ethnic identity and social norms. Chapters 2 and 3 focus on the role of ethnic diversity in determining the effectiveness of governance in Sub-Saharan Africa. The existing literature has demonstrated a tenuous link between diversity and ineffective governance, but many questions remain. Chapter 2 demonstrates that ethnic diversity has a significant negative effect on the provision of piped drinking water and electricity across a large sample of countries from Sub-Saharan Africa. In addition, it is demonstrated that the geographic scale of diversity measurement is critical to the analysis. Local diversity is negatively associated with an inherently local good, piped water, whereas regional diversity is negatively associated with a good provided regionally, electricity. This link between the scale of provision and the measurement of diversity is a key finding that should inform future work on diversity. Chapter 3 extends this analysis to consider why ethnic diversity matters for the provision of public goods. Including the two mechanisms suggested in the literature within a single model demonstrates that the key difference between them is the distribution of household access across ethnic groups. The empirical section of the chapter then provides evidence that ineffective governing institutions are the critical factor connecting local ethnic diversity to low levels of piped drinking water across Sub-Saharan Africa. Finally, chapter 4 focuses on the dynamic interaction between government institutions and social norms of honesty. While government institutions can be effective in promoting social capital development, there exists a social capital trap. For countries with social capital below this level, advances in government institutions will not improve the social environment. Further, social divisions caused by ethnic heterogeneity or economic inequality may increase the minimum level of social capital necessary to escape this institutional trap.