Institutions, Governance and Long Term Growth

Institutions, Governance and Long Term Growth

The aim of this research programme is to rethink the criteria on “good governance” and institutional quality, focusing on their effectiveness in economic development processes. The programme is based on detailed analysis of the institutional determinants of growth in countries that have gone through undeniable episodes of economic take-off. It aims to develop a new country-level diagnostic tool that applies both institutional analysis and economic analysis to the formulation of development strategies.

Since the 1990s, institutional reforms, particularly those aimed at “good governance” (transparency in government, free operation of markets, formalisation of rules, control of corruption, democracy, etc.), have featured among the priorities of development aid policies. Such reforms have not, however, demonstrated their effectiveness in putting the poorest developing countries on the path to higher and more robust growth. Many of the “good governance” reforms adopted are merely formal and do not address the sources of “bad governance”, which in contrast is quite real. The interest groups that lock the local economic and political dynamics in most developing countries into low-productivity equilibria are rarely bothered; at best, they are obliged to regroup and redeploy according to the new constraints or opportunities arising from donor actions.

A series of publications show that “good governance” is not the panacea, effective and applicable in all countries, that the Bretton Woods institutions would have us believe. Developing countries that have not initiated a take-off process would do better to concentrate on acquiring the governance capacities identified by the literature as characteristic of emergent and developed countries.

What are the fundamental governance capacities? They relate to collective decision-making and conflict management; the coordination and rallying of elites in support of a shared goal and vision; giving incentives to individuals and organisations so that they contribute to achievement of the common objective; the capacity to increase assets’ productivity by redeploying them towards activities offering increasing returns; the capacity to maintain social cohesion and political stability; the capacity to acquire or develop new technologies and the corresponding know-how. However, the specific institutional forms that have made it possible to perform these functions properly have varied greatly in history. It therefore seems illusory to think that any specific institutions are the “right” ones and that one need only establish them to reap the economic benefits.

The objective of AFD’s research programme on “Institutions, Governance and Long Term Growth” is develop an innovative method of analysing the institutional determinants of growth in a given country.

The AFD’s research program on “Institutions, Governance and Long-Term Growth” is composed of four types of complementary activities:

  1. Theoretical reflection on the role of institutions in development based on the conceptual framework of D. North, J. Wallis and B. Weingast and conducted in dialogue with several organizations such as SOAS (London).
  2. Improving institution measurement tools with the use of the Institutional Profiles Database (IPD) , and preparing its next version (IPD2012).
  3. A qualitative approach to the question of the relationship between institutions and long-term growth through the partnership with the University of Maastricht (Maastricht Graduate School of Governance): creation of a supplementary database, analysis of issues associated with measuring institutions and development, and the use of statistical and econometric tools to quantify the relationship between institutions and long term growth (and development).
  4. Country case studies taking a qualitative approach: analysis of the balances between the economic sphere and the political sphere and their impact on long term growth in the country studied, using political economy theories. Country case studies have been launched in India, China, Vietnam, Bangladesh, Turkey, Kenya, Burkina Faso, Madagascar. The studies are realized by researchers and research centers (SOAS, University of Maastricht, Maastricht Graduate School of Governance, FASOPO, University of Bogazici, University Paris Dauphine, IRD-DIAL); these studies will lead to the production of a monography of the country and a second document testing the framework and hypotheses of North, Wallis and Weingast.


Corresponding research officer : Nicolas Meisel

Associated Documents to this Research Program