Deep Economic Integration and State Capacity: A Mechanism for Avoiding the Middle-Income Trap?

27 Pages Posted: 22 Feb 2019

See all articles by Laszlo Bruszt

Laszlo Bruszt

Central European University

Nauro F. Campos

Brunel University London - Economics and Finance; Centre for Economic Policy Research (CEPR); University of Michigan at Ann Arbor - The William Davidson Institute; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 22, 2018

Abstract

Exiting the middle-income trap entails costly improvements in state capacity. That deep economic integration induces powerful actors to support increasing state capacities remain under researched. Here we ask: Under what conditions can deep economic integration yield increases in state capacity? We measure institutional change in 17 European former communist countries exposed to similar challenges of deep integration (European Union membership candidates), and find large variation in the evolution of their state capacities. To understand this variation, we put forward a conceptual framework and supporting hypotheses. From testing these, we empirically identify key relationships and specific reform implementation sequences. Our main result is the centrality of an intricate relationship between bureaucratic independence and judiciary capacity as a main driver of institutional change. Change in these two institutional fields, we find, is a precondition for increasing internal and external competition, which are key factors for successfully escaping the middle-income trap.

Keywords: institutions, middle-income trap, state capacity

JEL Classification: D85, H41, O17, O18

Suggested Citation

Bruszt, Laszlo and Campos, Nauro F., Deep Economic Integration and State Capacity: A Mechanism for Avoiding the Middle-Income Trap? (June 22, 2018). Asian Development Bank Economics Working Paper Series No. 547 (June, 2018). Available at SSRN: https://ssrn.com/abstract=3228960 or http://dx.doi.org/10.2139/ssrn.3228960

Laszlo Bruszt (Contact Author)

Central European University ( email )

Nador u 9
Budapest, 1022
Hungary

Nauro F. Campos

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Michigan at Ann Arbor - The William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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