Institutional Equilibrium Research Articles

Institutions as a factor in sustainable development

For many years, the concept of 'sustainable development' has been the subject of interest both in theory (variety of interpretations) and the broader social and economic life practice. It is also the subject of legislation - the principle of sustainable development is a constitutional norm in many countries. The focus is present in various international agreements and regulations of regional integration groups, such as the EU. Sustainability can be considered from various perspectives and approaches, including institutional. Institutions are becoming less of a condition than a factor in development processes. At the same time, institutions are characterised by relative permanence (mainly cultural elements and social norms) and variability at different times. Persistence is a problem of institutional equilibrium, while variability results from technical, technological and social conditions and development needs. This interweaving of endo and exogenous institutional factors underpins the institutional determinants of sustainable development characterised by a peculiar balance between environmental, economic and social values. It is also the increasing interconnection of local problems with global change. Dynamic economic changes result from many factors, including technological change - mainly digitisation and containerisation. Development dynamics require openness to new institutional arrangements. The institutional system contributes to the realisation of sustainable economic development mainly by improving the quality of institutions, a kind of approximation to the desired institutional pattern. This takes place at various levels of analysis, both on a global, regional, state scale and on the scale of a particular economic entity - mainly an enterprise. In doing so, the institutional matrix is supplemented by new institutions reconciling the requirements of efficient management with environmental goals and social inclusion processes.

The EU Recovery Instrument and the Constitutional Implications of its Expenditure

2021–2027 Recovery Plan for Europe and its Recovery and Resilience Facility have altered elements of the EU institutional equilibrium – constitutional consistency of the ensuing design – implications for the constitutional evolution of the EU – analysis of the expenditure of the Recovery and Resilience Facility – new fiscal economic stabilisation function – conditionality attached to the funds – strengthened role of the Council – nuanced multi-level financial governance – the fiscal stabilisation function enshrines a potential form of constitutional mutation – the new institutional framework for the expenditure of the EU funds seems to lean towards an intergovernmental preeminence

Institutional equilibrium in EU economies in 2008 and 2018: SEM-PLS models

Abstract The aim of the research is to identify the strength and direction of the development of the relationship between formal and informal institutions and to assess the institutional equilibrium of modern economies. The structural equations modelling based on partial least squares (SEM-PLS) is applied to achieve the purpose of the article. It is an econometric method that allows the measurement and analysis of the dependencies between latent variables (measures that cannot be directly observed). The study included 27 EU economies and the research period covered the years 2008 and 2018. The results of the study demonstrate that the quality of informal institutions strongly, positively determines the quality of formal institutions. The conducted analyses indicate that modern economies are diversified in terms of the quality of informal and formal institutions and, consequently, in institutional equilibrium. Considerable institutional disparities also translate into a large diversification in economic development. The article proposes a different meaning of institutional equilibrium, understood as the achieved state of institutional structure characterised by high quality informal institutions which interact with each other to improve the efficiency of formal institutions. The article presents a comprehensive model of the institutional structure and a unique method of measuring institutional equilibrium.

Conceptual fundamentals of institutional development of world financial architecture

The system theoretical generalization of the problems of modern functioning and transformation of world financial architecture within the framework of institutional paradigm is carried out in this paper. On this basis, the features of the institutional development of the global financial architecture as the most variable part of its institutional matrix, as well as scientific and practical recommendations for adapting the institutional structure of the financial system to the process of financial globalization are determined. According to the results of the investigation of the peculiarities of institutional development of the world financial architecture, it is found that institutional changes in the financial architecture are associated with changes in existing norms, rules, restrictions and mechanisms of their implementation, as well as changes in institutions. transformations of existing ones, mainly caused by crisis processes or the need to transfer certain powers to a single organization. Institutional development of financial architecture is a qualitative and quantitative structural changes in the financial system as a whole and its components related to the generation of institutional innovations, selection of effective institutions and their dissemination to reduce uncertainty, bad faith, transaction costs, information asymmetry. The equilibrium of financial architecture is substantiated as the state where the system-forming institutions remain relatively unchanged, and the dynamics of other institutional elements contributes to the creation of quality financial architecture. The institutional equilibrium of financial architecture is defined as its state in which system-forming institutions remain relatively unchanged, and the dynamics of other institutional elements contributes to the stability and efficiency of financial architecture, which ensures, first, stability of system-forming institutions costs, and, secondly, the dynamism of the «soft» elements of the institutional structure of the financial architecture contributes to its adaptability and, consequently, efficiency in the dynamic environment. It is the institutional development of financial architecture that creates the conditions for the growth of social progress, environmental stability and institutional efficiency.

Directivos ante situaciones de crisis. El uso de LinkedIn por parte de la CEO de Metro de Madrid durante la borrasca Filomena / Senior managers in crisis situations. The use of LinkedIn by the CEO of Metro de Madrid during the storm Filomena

In January 2021, the storm Filomena paralysed Spain. One of the most affected cities was Madrid, which suffered a general collapse for several days. Metro de Madrid (underground railway company and one of the most popular public services in the city) continued to provide service to its users. Silvia Roldan (CEO of Metro de Madrid) wrote a daily post on LinkedIn to explain to users what problems they were facing, how they were being solved and how the service was ensured. Metro de Madrid is an underground railway company that was inaugurated in 1919. It extends over 294 kilometres distributed in 302 stations. It employs 7,000 persons. Other data of Metro de Madrid are: 2,400 cars, 8,758 security cameras, 1,263 vending machines, 2,424 tele-indicators, 1,703 escalators, 541 lifts and 5,386 intercoms. "LinkedIn is a social network that has a great attraction, you are addressing a professional audience, which judges you on the basis of the work you do", says the CEO of Metro de Madrid in an interview conducted to illustrate this research. This research is based on two hypotheses: 1) In a crisis context, direct communication between a company's executive and stakeholders reduces uncertainty and helps to restore institutional equilibrium; and 2) It is possible to find a paradigmatic model in this type of communication with specific stakeholders. This research carried out a quantitative and qualitative analysis using a content analysis of Roldan’s posts on LinkedIn during this crisis and an interview with the CEO of Metro de Madrid. This case gives us some lessons in communication as main results. LinkedIn is an optimal platform for crisis communication, especially if we want to transmit moderately long messages, with nuances, aimed at a professional audience willing to listen and dialogue. Roldan’s colloquial and friendly tone used in her posts are justified in this case (Filomena crisis). She is CEO of the company, direct witness of the facts and responsible for the solutions that are implemented. She uses the first-person narrative, which produces closeness and is a good remedy against uncertainty. It complements institutional messages, transmitted through institutional media and channels, which use a more aseptic and formal tone. The use of photographs in the published posts establishes an emotional links between the author of the post and readers. Readers feel like a direct witness of the facts, especially when the photograph is a subjective close-up. LinkedIn, despite not being Metro de Madrid's main communication channel, is a useful and valuable platform for communicating in emergency situations, even in a more personal and less institutional way than other platforms. Perhaps its greatest virtue is to target a professional and specialised audience, which can be proactive in the resolution of an emergency. The use of LinkedIn in emergency situations is still under-researched compared to other social platforms such as Twitter, Facebook, WhatsApp or Instagram. This article is part of the competitive research project: “Crisis and emergency communication in Social Media. Study of its use in Spain and design of information protocols for institutions and media (COMCRISIS - PID2019-109064GB-I00)” granted and funded by the Ministry of Science and Innovation of the Spanish Government.

The Relationship between Institutional Design and the Efficiency of a Jurisdiction

Regional judicial bodies all serve to protect, interpret, and develop the law of the community in which they are established. While they share these common objectives, differences in admissibility, procedure rules, and jurisdiction can be noted. This study aims to shed light on differences in the design of jurisdictions; specifically, it explores whether they impact the efficiency of such courts. Our hypothesis is that institutional design can be used to fix issues – such as enforcement – that some Courts of Justice face. To test this theory, the study focuses on the Court of Justice of the Economic Community of West African States. Using rational design theory, the study of the Court’s case law, its history, and empirical observations, we found that the particularities in admissibility and procedural rules, as well as the scope of the Court’s jurisdiction, were established to bypass some issues linked to the lack of access to justice and weak rule of law in the area. The innovative institutional design allowed the court to be more efficient and helped to establish it as an alternative to national courts for citizens, which in turn promoted the rule of law in the region. However, some problems were left unsolved, and the Court today again faces issues it had managed to avoid in the past. This study concludes that institutional design can serve to create a more efficient judicial body, especially in complex regions. However, there is a risk of only observing short term effects if the adjustments made do not maintain a certain institutional equilibrium.

Detecting Looming Vetoes: Getting the European Parliament’s Consent in Trade Agreements

Since the implementation of the Lisbon Treaty, the European Parliament wields the power of consent over international (trade) agreements, enabling it to threaten a veto. Due to the extensive financial and reputational costs associated with a veto, the European Commission (hereinafter Commission) was expected to read these threats effectively. However, the Commission’s responses to such threats have varied greatly. Building on a fine-grained causal mechanism derived from information processing theory and an extensive process-tracing analysis of seven free trade agreements post-Lisbon, we explain why the Commission has responded differently to looming vetoes. Our analysis reveals that the variation in Commission responses derives from imperfections in its information-processing system, the ‘early-warning system,’ which had to be adapted to the new institutional equilibrium post-Lisbon. Because of this adaption process, factors exogenous to the parliamentary context (‘externalities’) as well as internal uncertainties (‘internalities’) add constant unpredictability to the Commission’s reading of the European Parliament.

Political machines and the curse of public resources in subnational democracies

PurposeThis paper argues that decentralization reforms in Colombia, implemented since the 1980s, have led to the decentralization of political clientelism rather than its demise. Clientelism is a system of political and economic institutions that turns every local democracy into an extractive political institution. The authors theoretically demonstrate that an increase in public resources will increase corruption.Design/methodology/approachThe authors develop and test a subnational public choice model, where clientelism in elections and corruption in public administration constitute a stable long-term institutional equilibrium. The model comprises two linked subgames: electoral tournament and corruption in public policy. The model makes two predictions that currently oppose predominant approaches: (1) increasing the severity of jail sentences to electoral crimes increases their price and the predominance of machine politics, instead of improving the quality of electoral tournaments and (2) increasing local governments' public finance increases clientelism in elections and corruption in public administration.FindingsThe authors find evidence in favor of the theoretical model of curse of public resources, using difference-in-differences estimation with a database 2016–17 of Colombia's 1,034 municipalities. This country is well-suited for our analysis because it has a long-term commitment to formal democratic processes (since 1958), while plagued by endemic corruption and clientelism problems.Originality/value(1) The theoretical approach is innovative and disruptive of current models on the problem, (2) the model builds upon the Colombian situation, a country with prominent corruption and political violence problems regardless of its relatively long-term commitment with free elections (since 1958) and (3) the theoretical discussion is tested using a comprehensive set of difference-in-differences estimations.

Muslim conquest and institutional formation

Recent studies suggest that Muslim military conquest (632–1100 CE) generated an institutional equilibrium with deleterious long-run political economy effects. This equilibrium was predicated on mamluk institutions: the use of elite slave soldiers (mamluks) and non-hereditary property rights over agricultural lands to compensate them (iqta). This paper evaluates this historical narrative by exploring the accuracy of its initial step. Using a difference-in-differences strategy, I show that conquest changed institutions in conquered territories. I then provide suggestive evidence that the presence and efficacy of mamluk institutions affected this institutional configuration and that leaders survived longer in power during the conquest period.

Relacje pomiędzy władzami centralnymi a władzami samorządowymi w świetle nowej ekonomii instytucjonalnej

The author tries to answer the question whether the new institutional economy may be more useful than the neoclassical economy in explaining economic and social relations existing within the institution of the state. The observed disturbances between central and local authorities, notably the attempts to diminish the role of self-government, can negatively affect the provision of public and social goods to the citizens, and consequently, lead to non-effective use of the limited resources and outlays. Based on her analysis of the concept of institution, the essence of the relation between central and local authorities and some concepts and methods of the new institutional economy, such as ‘principal – agent’ relationship, transaction costs, and cost–benefit analysis, the author concludes that the methods of the new institutional economy are useful in the analysis of the mechanism of the functioning of public authorities. Moreover, as in the case of the relationship between the economy and public institutions, there is a need for an institutional equilibrium within the system of public authorities (the state).

Economic freedom reform: does culture matter?

AbstractWe analyse the role of culture in economic freedom reform and dispersion in an unbalanced panel of up to 80 countries, and in dyadic models with up to 3,003 unique country pairs. We find that a sense of individualism strengthens the effectiveness of democracy in promoting economic freedom within countries over 1950–2015, and that institutional distance between countries increases in their cultural distance, suggesting an important role of culture in determining long-run institutional equilibria. Our results are robust to a large variety of socio-economic controls, measures of institutions and measures of bilateral geographic, economic and demographic distances.

Is the Confucian ethic a hindrance to economic development in China?

Opinions differ among academics concerning the relationship between the Confucian ethic and China’s economic development. This research reveals that the Confucian ethic originated from the practical demand for guaranteeing the smooth operation of households. Later, it developed into a coordinator between the government and individuals, thus bringing about the institutional compromise between the family system and bureaucracy, which is the foundation of the market system specific to China. In the future, the successful development of a market economy will be largely dependent on whether an institutional equilibrium between the government and market forces can be reached, and this will be strongly related to the Confucian ethic. This paper holds that Confucianism involves inherent conflicts between the macro and the micro level. At the macro level, Confucianism sets very high standards for wealth and morals, but at the micro level it pays little attention to how to create wealth. Accordingly, for the ongoing market reform, it is rational to continue introducing Protestant ethics-oriented Western systems since they are more advantageous in terms of increasing wealth accumulation. However, this process lacks stability and inclusiveness and is thus prone to the separation of wealth from morals. This is exactly where Confucianism should step in. This paper concludes that the long separation of wealth accumulation from the Chinese cultural traditions has become the biggest obstacle to China’s economic growth. In the face of intensified social and economic conflicts, the only appropriate option is to revive tradition and root the reform in China’s own cultural soil.

How institutional theories explain and fail to explain organizations

PurposeThis essay raises a concern about the trajectory that new institutionalism has been following during the last decades, namely an emphasis on heterogeneity, change and agentic behavior instead of isomorphism and conformist behavior. This is a crucial issue from the perspective of the philosophy and methodology of science since a theory that admits both change and stability as a norm has less scientific weight then a theory that predicts a prevalence of passivity and isomorphism over change and strategic behavior. The former provides explanations and predictions while the latter does not.Design/methodology/approachThe paper offers an analysis of the nature, characteristics, functions and boundaries of institutional theories in the spirit of philosophy and methodology of science literature.FindingsThe power of the former institutional theory developed by Meyer, Rowan, DiMaggio and Powell lies in its generalization, explanation and prediction of observable and unobservable phenomena: as a typical organizational theory that puts forward directional predictions, it explains and predicts the tendency for organizations to become more similar to each other over time and express less strategic and interest-driven behavior, conforming to ever-increasing institutional pressures. A theory of isomorphism makes scientific predictions while its modern advancements do not. Drawing on Popper's idea of the limit of domains of explanation and limited domains of theories we present two propositions that may direct our attention towards the strength or weakness of institutional theories with regard to their explanations of organizational processes and behavior.Practical implicationsThe paper draws implications for further theory building in institutional analysis by suggesting the nature of institutional explanations and the place of institutional change in the theoretical apparatus. Once institutional theory explains the tendency of the system towards equilibrium, there is no need to explain the origins and causes of radical change per se. Institutional isomorphism theory explains and predicts how even after radical changes organizational fields will move towards isomorphism, that is, institutional equilibrium. The task is, therefore, not to explain agency and change but to show that it is natural and inevitable processes that organizational field will return to isomorphic dynamics and move towards homogenization no matter how much radical change occurred in this field.Originality/valueThe paper discusses the practical problems with instrumental utility of institutional theories. In order to be useful any theory must clearly delineate its boundaries and offer explanations and predictions and it is only the former 1977/1983 institutional theory that satisfies these requirements while modern advancements merely offer ambiguous theoretical umbrellas that escape empirical tests. For researchers therefore it is important to recognize which theory can be applied in a given limited domain of research and which one has little or no value.

Case-Based Analysis of Drivers and Challenges for Implementing Government-Led Urban Village Redevelopment Projects in China: Evidence from Zhejiang Province

This paper analyses urban village redevelopment projects (UVRPs) in contemporary China using a case-based analysis method. Based on the data collected from 394 UVRPs in Zhejiang province, we reveal that the top-down institutional arrangement is the dominant method for redevelopment of urban villages. Wenzhou city is picked as an example to explore the drivers, policies and barriers for UVRP implementation under the top-down institutional arrangement. According to the secondary data of government policies and documents, striking the balance of social, economic, and ecological benefits to achieve more sustainable and new-type urbanization is found to be the main stimulus. Grounded in the original fieldwork conducted in 26 urban villages in Wenzhou, this study unravels how the policies for UVRPs are formed and implemented. As for the barriers, from the perspective of villagers, social disputes are caused by the unclear definition of legal property rights, the demand for the construction of temporary relocation housing for the elderly, and the high construction costs of relocated high-rise buildings. The government blames the unruly villagers or nail householders for their excessive requests which increase the transaction costs for settling these issues. Besides, poorly-designed policies impede policy implementation. In view of the high costs of policy alteration, the lock-in effects or policy continuity preferred by the government echo the institutional equilibrium put forward by North.

A Study on the Institutional Transformation of Korean Film Policy Regime - Focusing on the relationship between social democratization and the growth of the film industry

본 연구는 역사적 제도주의 관점에서 한국 영화정책 체계의 제도적 전환을 기술하였다. 비교역사적 방법을 통해 역사적 시기를 구분하고 시기별 차이와 정책실행 결과를 살펴봄으로써 한국 영화산업이 성장할 수 있었던 정책 변수와 동력을 찾고자 하였다. 한국 영화정책 체계는 1961년에서 1984년까지의 정부 주도적(government-led) 시기, 1985년 영화시장 개방부터 1998년까지의 제도적 전환기, 1999년부터 현재까지의 시장주도적(market-led) 시기로 구분할 수 있다. 1980년대 이후의 사회 민주화는 검열제도를 비롯한 불합리한 규제를 폐지하고 진흥 중심의 정책 거버넌스를 구축하였으며, 민주화 운동을 경험한 세대가 영화계에 진출하여 정책 활동에 참여할 수 있는 정책 통로를 제공했다. 정책 체계의 제도적 전환은 정책의 가능성과 행위자들의 전략을 변화시켜 시장개방의 위기를 딛고 산업이 성장할 수 있었던 간접적이지만 결정적인 동력이되었다.This study took a comparative historical approach to the Korean film policy regime from the perspective of historical institutionalism. Through this, this tried to find out what the policy variables and forces were that helped the Korean film industry overcome its market opening in the 1980s and subsequent downturns. The Korean film industry has made an institutional transformation from a government-led system to a market-led system in the wake of the market opening that began in 1985. The opening of the film market caused a crisis in the Korean film industry, but it also served as a crucial junctures in dismantling the institutional equilibrium of the policy system established under the leadership of the authoritarian government since the 1960s. Social democratization after the mid-1980s became an indirect but decisive driving force for the success of the film industry, setting the backdrop for industrial capital and up-andcoming personnel to cooperate in the film industry. The change in the political system served as an opportunity to abolish unreasonable regulations, including the censorship system, and to establish policy governance centered on promotion and support, and to provide channels for people who experienced democratic movements to enter the film industry and participate in policy activities. An internal variable that produced unintended consequences of policies by refraction of external environmental changes in the Korean film industry s market opening is the change in the political system caused by the democratization of Korean society.

INSTITUTIONAL ECOSYSTEM AS A NEW PARADIGM OF NATURE MANAGEMENT DEVELOPMENT

Topicality. The non-institutional methodology of environmental management based on the formation of the “institutional ecosystem” has been considered and scientifically substantiated. The scientific categories that provide its methodological integrity are substantiated: “institutional dominants”, “replicates”, “institutional players”, decomposition of these concepts within the framework of modern economic-ecological and neo-institutional theory, its connection in the context of the formation the national institutional model of eco-management. A number of institutional innovations (replicates) have also been proposed, in particular the requirements for updating Annex XXX to the EU - UA Association Agreement in the context of the development of the national eco-management system.Aim and tasks. The aim of the article is to discuss the challenge to institutional development for institutional ecosystem as a new paradigm of nature management development.Research results. Institutional ecosystem - a dynamic, balanced, sustainable, self-replicating, regulated system that is "comfortable" for the entities of institutional relationships that transact with each other, is also a source of institutional ecosystem formation (role of the entity), involved in its formation , development, regulation (through the formation of institutional discourse), consumption (through the use of part of the institutional environment under its influence) and acting on principles: Institutional prediction based on the transformation of institutional dominance; -Replication (timely exit from the "comfort zone" for institutional transformations and system fertility at different hierarchical levels; Incubation - ensuring the completeness of the institutional cycle. There is an institutional ecosystem equilibrium balance between institutional rules (dominant), conditions (subdominants). However, this situation is short-lived: In the current context, institutional dominance is changing rapidly. And the institutional ecosystem has to “adjust” internal institutional conditions (subdominants) in order to obtain a state of equilibrium (institutional homeostasis).Conclusion. 1. The ecosystem, as a scientific category used in economics, is primarily characterized by internal dynamics and development under the influence of internal and external factors. 2. The ecosystem is seen as a network consisting of elements, some of which are the largest and define ecosystem health; it is defined by the relevant dominant. 3. Cooperative and mutual aid processes play an important role in the functioning of ecosystems, regardless of the status and capabilities of their participants. This approach is completely in line with the basic tenet of the non-institutional economy on the support and role of "weak links".

Institutionalism of rational choice: theoretical and methodological foundations and Ukrainian political science

It has been substantiated that the use of a research strategy of rational choice institutionalism was one of the factors that contributed to a return to the institutional theory of policy analysis individual dimension in the paper. Possibilities to achieve utility and distribution of resources in society at the political process micro-level began to be considered as sufficiently important resultants of functioning of the institutional system alongside macro-politics. In addition, it is specified that application of the methodology of the STEM subjects has allowed characterizing the activities of political institutions using the terms of effectiveness, which led to a reorientation of the study of their informal varieties as real regulators of political behaviour. However, the interest in empirical development has created the danger of rationalizing the politics up to its dehumanization, whereof avoiding, according to foreign political scientists, is possible adhering to ethical constraints that arise from the peculiarities of complex human nature.As a result of the analysis held, it has been found that, unlike the studies of foreign experts who distinguish various substantive areas of analysis in the theory of rational choice institutionalism, the applied potential of implementation of elements of its methodology in the works of Ukrainian scientists is rather instrumental. The general conclusion is that the research strategy of this version of new institutionalism in the practical plane is used mainly as one of many methodological approaches to the study of different political phenomena and processes. To some extent, similar to the particular area of research that reveals the analytical resource of rational choice institutionalism is to study the peculiarities of formation and functioning of parliament and the related processes (electoral strategies and coalition arrangements).It is emphasized that the most interesting for us may be the segment of scientific works, which are based on the theory of rational choice institutionalism, and related to the analysis of those factors that may impede democratic transformations in transitional political systems. It can be argued that inefficient political institutions, despite their irrational nature, continue to function in the political system because they are the product of a rational choice of influential political actors. In this case, the understanding of the very concept of rationality is distorted, which from an absolute category is transformed into a relative one, not only because of the limitations associated with the action of moral and ethical factors, but mainly due to maintenance of an inefficient institutional equilibrium, i.e. an institutional trap.

Vescovi, Comune ed élites cittadine. Spazi e luoghi del potere nella Siena medievale

The article deals with the 'spaces of power' in Siena between the 11th and the first decades of the 14th century. In this context, the buildings that represent the "protagonists" of urban development (bishops, municipalities and city elites) have been selected and analyzed from the archaeological, historical, architectural and topographic point of view: the episcopal complex for its religious power, the squares and the town hall for their administrative authority, the private residences for the lay elites. The transition of the antique city to the municipal urban area under a constant expansion resulted in new political and institutional equilibrium that affected both the forms and the meaning of architecture within the urban area. The formation of new spaces witnesses a power (religious, political and socio-economical) that shaped the architectural panorama of Siena in less than two centuries. In numerous cases, it favors the "public" dimension of the construction, becoming a new form of expression and the symbol of power.

Institutional evolution of open and close forms of capitalism – A case of Holland and Japan

Abstract In the tradition of comparative capitalism, Japan represents a continental banking-oriented system. Holland represents an Anglo-Saxon market system. In Varieties Of Capitalism, Holland and Japan are identified as the same type of Liberal Market Economy (LME) or Coordinated Market Economy (CME). Only a dynamic view presented in this paper explains why Holland and Japan are now LMEs, as they used to be in the years 1868–1930. Holland and Japan used to be CMEs in the years 1910–1970s. The institutional equilibrium of open capitalism in Holland and close capitalism in Japan can explain periods of economic stagnation in the years 1603–2018.

Disparate geography and the origins of tax capacity

We establish a conceptual and empirical link between the geographic distribution of economic endowments within a nation and long-run fiscal capacity. Economic geography informs elites’ incentives to facilitate large-scale central taxing bureaucracies. Sectoral economic advantage also provides them with leverage to transform these state-building incentives into policy and stable institutional equilibria. We argue that unequal economic endowments across the geography of a nation exacerbate distributive tensions. Political disagreement over the size and the scope of the state hinder centralized investments in state capacity to collect taxes. Using detailed sub-national data and indicators of geographic distribution, we demonstrate global patterns of sub-national economic geography, and how these patterns are related to sub-national variation in economic productivity. We show that divergence in sub-national economies varies across the world and is related to predictable differences in the size of the fiscal state.