Institutions and Market Reform in Emerging Economies: A Rent Seeking Perspective

Posted: 15 Feb 2002

See all articles by Ram Mudambi

Ram Mudambi

Temple University - Department of Strategic Management

Pietro Navarra

University of Messina - Institute of Economics and Finance; London School of Economics & Political Science - CPNSS

Chris W. Paul

Georgia Southern University - Department of Finance and Economics

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Abstract

The role of institutions as determinants of rent seeking success is well established. In this paper, we focus on institutions that have received little attention in the literature, namely electoral institutions. We examine three measures of electoral institutional structure that are hypothesized to be instrumental in determining the level of rent seeking. These are the type of electoral system, pluralistic or proportional; method of selection of the chief executive, presidential or parliamentary; and the number of electoral districts. An index of economic freedom is used as the metric for rent seeking opportunities created by governments. Theoretical implications of variation in these electoral institutions are developed and empirically tested employing data from 29 countries classified as having emerging market economies. Countries with emerging economies are expected to exhibit more institutional flexibility that more developed countries whose property rights are well established and defended. The empirical results are controlled for differences in a number of demographic and historical factors. Plurality electoral systems are more resistant to the political demands of rent seeking than proportional systems. Fewer election districts seem to reduce rent seeking opportunities. However, conditional on the type of electoral system, presidential systems are found to be no more resistant to rent seeking than parliamentary systems. Finally, we find strong control effects. Literacy increases a country's resistance to rent seeking while military spending and years of institutional entrenchment reduce it.

Keywords: Rent-seeking, institutional economics, international business

JEL Classification: D720, D780, H500

Suggested Citation

Mudambi, Ram and Navarra, Pietro and Paul, Chris W., Institutions and Market Reform in Emerging Economies: A Rent Seeking Perspective. Available at SSRN: https://ssrn.com/abstract=300656

Ram Mudambi (Contact Author)

Temple University - Department of Strategic Management ( email )

Fox School of Business and Management
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United States
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HOME PAGE: http://sbm.temple.edu/~rmudambi/index.html

Pietro Navarra

University of Messina - Institute of Economics and Finance ( email )

Piazza Pugliatti 1
Messina
Sicilia, 98122
Italy
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London School of Economics & Political Science - CPNSS ( email )

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United Kingdom
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Chris W. Paul

Georgia Southern University - Department of Finance and Economics ( email )

P.O. Box 815s
Statesboro, GA 30460
United States
912-681-5161 (Phone)

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