Institutional Credibility Measurement Based on Structure of Transaction Costs: A Case Study of Ongniud Banner in the Inner Mongolia Autonomous Region

Abstract

The need to assess institutional efficiency remains a key issue in institutional economics. Credibility theory is a useful theoretical innovation that uses institution function to analyze institutional efficiency. However, current credibility measurement methods have shortcomings. In this research, we developed a method to measure institutional credibility based on the transaction cost structure. We used the ratio of endogenous transaction costs to transaction costs, and the ratio of transaction costs to total cost, to get the transaction cost structure coefficient. Then, based on the correspondence between institutional credibility and the transaction cost structure, we developed a model to analyze and evaluate institutional credibility. As a case study, we provided a longitudinal and horizontal comparison of the credibility of two ecological governance policies from Ongniud Banner in Inner Mongolia. The study showed that our institutional credibility evaluation model is feasible. The model can compare institutional credibility over time, and provide a horizontal comparison of the credibility of different institutions. Our proposed approach is of significance because it avoids the shortcomings of existing credibility measurement methods, and provides quantitative assessment of institutional credibility.