This paper introduces the concept of institutional resilience based on a population game. Agents in an economy are randomly matched to play a coordination game with two strategies, cooperate and defect. A breach of contract can be adjudicated in court. Agents can update their strategy, which is modelled using the replicator dynamic. In this context, cooperation is defined as the informal institution, whereas the legal system (contract law) constitutes the formal institution. Institutional resilience is defined by how the formal institution of a functioning legal system complements the informal institution of cooperation in a dynamic way. In the wake of an adverse exogenous shock, the formal institution can prevent a total breakdown of cooperation in the population.

Institutions matter for postdisaster recovery. Conversely, natural disasters can also alter a society's institutions. Using the synthetic control method, this study examines the effects that Hurricane Katrina (2005) had on the formal and informal institutions in Louisiana. As measures of formal institutions, we employ two economic freedom scores corresponding to government employment (GE) (as a share of total employment at the state-level) and property tax (PT). These measures serve as proxies for the level of governmental interference into the economy and the protection of private property rights respectively. To assess the impact on informal institutions, we use state-level social capital data. We find that Hurricane Katrina had lasting impacts on Louisiana's formal institutions. In the post-Katrina period, we find that actual Louisiana had persistently higher economic freedom scores for both GE and PT than the synthetic Louisiana that did not experience the hurricane. These findings imply that the hurricane led to a reduction in both PTs and GE, which indicates a decrease in the relative size of the public sector as a share of the state's economy. On the other hand, we find no impact on our chosen measure of informal institution.

It is often argued that governments take advantage of extreme events to expand their power to the detriment of the political opposition and citizens at large. Violations of constitutional constraints are a clear indication of such opportunistic behaviour. We study whether natural disasters, conflicts and other extreme events systematically diminish governments' compliance with constitutional constraints. Our results indicate that governments are most likely to overstep their competences or disregard their responsibilities during civil conflicts, at the onset of international sanctions or following successful coups d’état. Interestingly, Cold War interventions by the United States that installed or supported a political leader led to a decrease in constitutional compliance in the target country, whereas Soviet interventions had no such effect. In contrast, banking crises and natural disasters, which threaten societies at large, but not necessarily the political elite, do not cause a significant decline in constitutional compliance.

This note updates a measure of lockdown regulatory freedom for 2021 and then uses it to adjust countries' 2021 economic freedom scores to account for pandemic regulations that impact economic freedom but otherwise would go unmeasured. We directly follow Miozzi and Powell's (2023a, Journal of Institutional Economics 19(2), 229–250) methods to measure lockdown regulations and adjust 2020 economic freedom scores. Thus, when paired with those findings we provide a data set that consistently measures coronavirus disease 2019 regulations and economic freedom over the course of the pandemic that can be used in other research. We find that lockdown regulatory freedom increased as countries scaled back pandemic regulations, while other areas of economic freedom continued declining. We also find that adjusting for lockdown regulatory freedom continues to significantly impact countries' relative ranking in economic freedom.

It is now abundantly clear that social norms channel behaviour and impact economic development. This insight leads to the question: How do social norms evolve? This survey examines research that relies on geography to explain the development of social norms. It turns out that many social norms are either directly or indirectly determined by geography broadly conceived and can, hence, be considered largely time invariant. Given that successful economic development presupposes the congruence between formal institutions and social norms, this insight is highly relevant for all policy interventions designed to foster economic development. In a companion paper, the role of religion and family organization as potential mediators between geography and social norms assumes centre stage.

Institutions matter as regards foreign location investment decisions, but how they matter and in what ways, is still unsettled. We differentiate between absolute and relative institutional effects on both location choice and on the size of the FDI and do so by examining India's outward FDI flows between 2008 and 2020. We find that absolute and relative institutional measures have different effects, and these are noticeable at different stages. We show that the quality of institutions affects location choice, but once they have made that decision then the scale of the investment is impacted by institutional threshold effects and institutional distance, and we explain why this could be the case. We provide further nuance to studies on the asymmetrical effects of institutions on outward FDI. We provide empirical evidence that the effects of absolute institutions matter more where host countries lie at the lower end of the institutional profile distribution. Likewise with institutional distance—it might not be the direction of the difference that matters so much as where the host country is located along the institutional profile distribution. This has substantial consequences from both a managerial and a policy perspective.

We explore the heterogeneous effect of migrant remittances on citizens' support for taxation using a sample comprising 45,000 individuals from the Afrobarometer survey round 7 [2016–2018] across 34 African countries. To correct for unobserved heterogeneity, we endogenously identify latent classes/subtypes of individuals that share similar patterns on how their support for taxation is affected by their unobserved and observed characteristics, including remittance dependency. We apply the finite multilevel mixture of regressions approach, a supervised machine learning method to detect hidden classes in the data without imposing a priori assumptions on class membership. Our data are best generated by an econometric model with two classes/subtypes of individuals. In class 1 where more than two-thirds of the citizens belong, we do not find any significant evidence that remittance dependence affects support for taxation. However, in class 2 where the remaining one-third of the citizens belong, we find a significant negative effect of remittance dependence on support for taxation. Furthermore, we find that citizens who have a positive appraisal of the quality of the public service delivery have a lower probability of belonging to the class in which depending on remittance reduces support for taxation. The findings emphasize the need for efficient public services provisioning to counteract the adverse effect of remittances on tax morale.

This paper assesses Brazil's real convergence (1822–2019) through unit root tests and Markov Regime-Switching (MS) models in three different scenarios: towards (i) other six Latin American countries (LA6); (ii) Portugal; and (iii) the technological frontier country, the US. The extended unit root test results favour Brazil's very long-run real convergence towards LA6 and Portugal, but not the US. The estimated MS models, involving two different regimes, real convergence and real non-convergence/divergence, capture institutional quality's positive effect in promoting Brazil's real convergence.

This paper draws on macroeconomics, the economics of institutions and the economics of trust to explain private savings at the national level for 33 OECD (mostly European) countries from 2002 to 2012. More specifically, it raises two questions: (i) is it the quality of institutions or trust in institutions that drives private savings? (ii) if trust matters, what is the appropriate institutional level at which it operates? To answer these questions, we add to the usual explanatory variables of private savings three measures of institutional quality and six measures of institutional trust, distributed between the following institutional levels, presented in assumed hierarchical order: political, legal, financial and social. We find that trust in political institutions is the most significant driver of private savings. This contributes to the literature underlining the importance of subjectivity in social and economic phenomena and suggests, for private bank savings in countries having highly regulated banking systems, the existence of a hierarchy of trust in which trust in the highest-ranking institutions (political – and to a lesser extent legal – institutions) acts as a substitute for trust in every lower-ranking institution (financial institutions and social trust).

It is now abundantly clear that social norms channel behaviour and impact economic development. This insight leads to the question: How do social norms evolve? In a companion paper (Voigt (2023). Journal of Institutional Economics, 20), I survey studies showing that geographical conditions can have direct and long-lasting effects on social norms. This paper goes one step further: It surveys studies that show how different geographical conditions affect both religious beliefs as well as traditions of family organization and how these, in turn, affect social norms.

This paper advances a pre-colonial institutional thesis to explain the variation in the salience of ethnicity in African societies. It posits that pre-colonial political centralization facilitated the accumulation of economic and institutional advantages, positioning descendants of centralized ethnic groups to benefit from these advantages within postcolonial states. Social identity choices are rational; therefore, descendants of centralized ethnic groups, who enjoy greater advantages within the nation, find less incentive to choose their ethnicity over their national identity. Examples from Ethiopia and Ghana as well as the evidence from combining individual-level survey data from the Afrobarometer with historical data on pre-colonial political centralization support the theoretical claim. In particular, the paper presents both theory and evidence indicating that individuals with ancestors from politically centralized pre-colonial societies are less likely to favour their ethnic identity over their national identity . These findings underscore the importance of considering pre-colonial legacies when promoting national unity.

A growing number of labour market participants transact through gig platforms. This choice should reflect a reduction in transaction costs for platform users, compared to costs they meet when using alternative modes of governance. We exploit a unique cross-platform, cross-country data set of gig platform users to test the impact of the institutional environment in one of its dimensions – the strictness of labour market regulation (LMR) – on the ability of gig platforms to reduce users' transaction costs. According to our findings, the regulation indicator of both the user and platform countries influences transaction costs for platform users, even controlling for platform and user characteristics. The platform appears to reduce transaction costs most when users face stricter or weaker LMR, in a U-shaped effect. In the former case, the platform may provide an escape from labour regulations when hiring for tasks, while in the latter case, the platform can economize on the usual transaction costs of private contracting by administrating some types of users' activities.

In this paper we seek to integrate human needs and self-actualisation into the design of organisational governance. We problematise the assumptions that guide established justifications for governance, thus providing an opportunity for this type of theoretical approach. Drawing on Maslow's human psychology, we consider the potentially regressive features of the prescriptions of transaction cost theory (TCT), particularly the new institutionalist approach, and suggest inclusiveness as a mode of coordination that firms may wish to pursue to enhance self-actualisation. The main value added of this contribution is to highlight the need to discern among modes of governance design, using criteria of welfare maximisation by enabling opportunities for self-actualisation within the firm, different from the TCT focus on internal efficiency.

This paper highlights scholarly neglect of political legitimacy, the idea of a state's use of power in ways acceptable to its citizens. We argue that political legitimacy affects a state's ability to formulate and implement its policies, thus affecting governance. Our paper provides the first empirical evidence of the positive relationship between political legitimacy and governance. We combine novel cross-sectional data on political legitimacy and several governance indicators from 66 countries. Our results show that a one-standard-deviation increase in the legitimacy score increases the rule of law indicator by about one-third standard deviation. These results are robust across OLS, an instrumental variable method, and several other governance indicators. Moreover, our results reveal that in the presence of greater trust, political legitimacy has an enhanced impact on governance.

Yoram Barzel was a Chicago trained price theorist who became a foundational contributor to the literature on property rights and transaction costs. In this commemoration I outline the academic path he took, but then concentrate on the set of transformative ideas he had that led to ‘the theory of economic property rights’. It was Yoram's belief that such a theory is the ground floor for the study of the organization of economic activity, and therefore, should be used to understand the structure and form of law, institutions, firms, and all other forms of organization.

The Economic Freedom of the World report measures five dimensions of economic freedom, one of them being Sound Money. Compared to where it had been in decades for most of the West, inflation skyrocketed in 2021. Yet the indicator which measures inflation in the most recent year barely budged due to how it is specified and parameterized. This paper explores potential improvements on the methodology, although ultimately only modest improvements are achieved over simply changing the value of inflation that corresponds to zero (the lowest index score) in the simplest linear specification.

Is ‘individualism’ pure selfishness? The climate change literature often assumes so. However, individualism can be seen as capturing values aligned with self-determination and self-achievement but also universalism. Indeed, cultural psychology recognises individualism as reflecting both personal agency and one's embeddedness, not in narrowly defined in-groups, but in society broadly. Through this lens, individualism can be consistent with adopting pro-social behaviours, including climate-friendly behaviours. But the under-exploration of the concept means empirical evidence is limited. Using cross-country, cross-sectional data we find that individualistic values are associated with an increased willingness to take individual-level actions against climate change. Individualism is also not associated with less support for additional taxes levied to fight climate change, and those willing to take more individual level actions against climate change are also more supportive of additional climate change taxes. Overall, our results confirm that individualism can be associated with taking actions for the greater good.

Even at long time horizons, modern outcomes are in some sense bounded by history. Culture shapes how people interact and as it propagates across generations, groups with more common ancestors face less frictions to cooperation. This, in turn, affects institutional and technological diffusion, implying a society's history plays a crucial role in the causes of sustained long-run economic growth. To test this, we follow other studies by proxying for historical effects with genetic relatedness, which yields a temporal proportionality of shared common ancestry. Measuring cultural traits are more challenging. We develop a new systematic measure through network analysis of Wikipedia. Connectivity statistics over the encyclopaedia's hyperlink-directed network captures unique features of cultural relatedness. Further, as we index pages, we can coarsen the network into specific topics. The results show how history correlates broadly over a range of cultural factors. Differences across the coarsened networks demonstrate not simply that history matters, but where it matters less.

Recent work has argued for a Hayekian behavioural economics, which combines Austrian economics with behavioural economics as developed by Kahneman, Thaler, Sunstein, and others. We suggest that this hybrid is misguided because it relies on individual cognitivism. This view of cognition is incompatible with the Hayekian view of cognition which treats rationality as an emergent phenomenon of social interaction in an institutional environment. This Hayekian view, which we call epistemic institutionalism, is compatible with an alternative prominent perspective in psychology, that of the extended mind, sometimes known as 4E cognition. We demonstrate how the Hayekian perspective on individualism, the price system, and the evolution of rules can be connected to the extended mind programme, through concepts such as the coupling of the individual and their environment, cognitive off-loading, and affordances. We suggest that this alternative combination of Austrian economics and psychology provides a more fruitful way forward, especially because it foregrounds the processes of learning, error-correction, and institutional orders, rather than choice, bias, and individual rationality. To explain why Austrian economists have been receptive to behavioural economics, we distinguish epistemic institutionalism from the (radical) subjectivist approach, which shares key assumptions of individual cognitivism.

This paper explores the role of artificial intelligence (AI) within economic institutions, focusing on bounded rationality as understood by Herbert Simon. Artificial Intelligence can do many things in the economy, such as increasing productivity, enhancing innovation, creating new sectors and jobs, and improving living standards. One of the ways that AI can disrupt the economy is by reducing the problem of bounded rationality. AI can help overcome this problem by processing large amounts of data, finding patterns and insights, and making predictions and recommendations. This insight raises the question: can AI overcome planning problems – could it be that central planning is now a viable option for economic organisation? This paper argues that AI does not make central planning viable at either the nation-state level or the firm level, simply because AI cannot resolve the knowledge problem as described by Ludwig von Mises and Friedrich Hayek.