Institutional Rigidities Research Articles

Who Cuts Back and When? The Politics of Delays in Social Expenditure Cutbacks, 1980–2005

This article investigates the politics of delays in social spending cutbacks in OECD democracies. In the context of fiscal austerity, policymakers are assumed to have a strong incentive to manipulate the timing of cutbacks strategically. Applying event history analysis to small and large cutbacks in 21 mature welfare states, the authors test whether partisanship, electioneering and institutional constraints contribute to explain the timing of cutbacks. Macro-economic determinants such as worker productivity, economic growth and unemployment are found to be more important than these political variables. However, left-wing governments and welfare states with more institutional rigidity or a greater degree of contribution financing do tend to delay welfare cutbacks, while cabinets that have recently changed their party composition implement cutbacks earlier.

Australia’s Export Potential: An Exploratory Analysis

A country’s inability to export to its potential is a reflection of institutional and structural impediments and rigidities that exist at home as well as in its trading partners. Distinguishing the rigidities that exist in home and trading partner countries as ‘behind the border’ factors and ‘beyond the border’ factors, respectively, this paper examines the impact of ‘behind the border’ factors on the home country’s export potential. This can be done by choosing either a developing country or a developed country. It is generally assumed that the ‘behind the border’ factors exert more negative effects on export potential in developing countries than in developed countries due to the former’s institutional, infrastructural and policy weaknesses. As this is an empirical question, we test the hypothesis that the ‘behind the border’ factors would exert insignificant negative effects on export potential of developed countries by influencing them to achieve their export potential fully. Australia, which is relatively open among the resource-based developed economies, is chosen for testing the hypothesis by estimating a stochastic frontier gravity model using bilateral data from 2006 to 2008 on trade with its key trading partners. The empirical analysis indicates that even in the case of Australia, ‘behind the border’ factors are important in explaining the reasons for its failure to export to its full potential.

The influence of policy on soil conservation: A case study from Greece

AbstractErosion of topsoil, loss of organic matter and irrigation water salinisation are the major soil conservation issues in Greek agriculture. Cross‐compliance measures applied under the Common Agricultural Policy (CAP) form the backbone of the soil conservation policy in Greece. CAP reforms and especially the transition to decoupled farm payments, instability in world agricultural commodity prices and contradicting agricultural policy signals are the major causes of changing farming practices. The incapability of institutional structures to follow the observed changes is attributed to the lack of appropriate infrastructure and low levels of human capital in quantitative and qualitative terms in the region. Soil conservation efforts are strongly influenced by a piecemeal policy framework and institutional rigidities. The present work uses case studies presenting failures and success in applying soil conservation policy in Greece Institutional capacity, building is necessary to support the implementation of conservation policy at local and regional levels. Copyright © 2010 John Wiley & Sons, Ltd.

Economic Partnership Agreement between West Africa and the European Union in the Context of the World Trade Organization(WTO) and the Regional Integration Process

A new cooperation Agreement has been signed between the European Union and the 77 ACP Countries in Cotonou (Benin) on June 23rd 2000. A point of this agreement is regarding a new trade cooperation between these different countries in districts (or regions) gathered and the European Union, based on a preferential reciprocal liberalisation. This agreement is intervening in the context of globalisation, the multilateral trade liberalization, the regionalization, the renewal of regional integration processes and, the multiplication of the internal conflicts in Africa. This paper ask if is the economic Partnership Agreement able to take into account the needs for development of the ACP countries in the strict frame of the region Western Africa The thesis developed herein want to demonstrate that the principles of the APE do not allow to take really the needs of development for the countries of the region Western Africa: in consideration to the context, the APE characteristics, the structural and institutional rigidities' of the economies of these area.

Mistrust and Lack of Market Innovation

The fundamental problem discussed in this article is the lack of accord between market adaptation and traditional production practices, which may result in a loss of competitiveness in some industries. A key question of this article is why salted fish consumers in Spain, formerly an important market for Norwegian salted fish producers, are seemingly unable to influence production practices within the Norwegian salted fish industry. The Norwegians have lost significant market share in Spain because of their failure to meet the demand for new products, which required different production methods. Based on institutional and evolutionary economic theories and focusing on production systems, institutional rigidity and path dependency, this article analyses two causes of market failure: the structural conditions for industrial adaptation; and mistrust among most of the core actors in the Norwegian salted fish industry. Mistrust is one significant reason for the failure to establish networks and collective innovation practices in order to adapt to market demands. The article concludes that, instead, actors in the seafood industry developed an ‘imaginary innovation system’ in which they believed that they were innovative and competitive, whereas in reality they were defending individual positions within traditional production practices.

Global Governance and Systemic Risk in the 21st Century: Lessons from the Financial Crisis

AbstractRecent decades of globalisation have created a more interconnected, interdependent and complex world than ever witnessed before. While global policy has focused on facilitating integration, the implications of growing interdependence have been largely ignored. The acceleration in global integration has brought many benefits, but it also has created fragility through the production of new kinds of systemic risks. This article provides a framework for understanding these new 21st‐century systemic risks and examines the challenges they pose to global governance. The 2008–2009 financial crisis will be used to illustrate the failure of even sophisticated global institutions to manage the underlying forces of systemic risk. We show this is symptomatic of institutional failure to keep pace with globalisation. The failure of the most developed and best‐equipped global governance system, finance, to recognise or manage the new vulnerabilities associated with globalisation in the 21st century highlights the scale and urgency of the global governance challenge.Policy Implications The rise of systemic risk requires a systemic response. Effective global governance and policy development have never been so necessary and urgent. The financial crisis illustrated that current global financial institutions are inadequate in their policy response to systemic risk and cannot keep pace with innovation and increasing system complexity in global finance. Deeper structural changes are required, including regulatory reforms. The institutional rigidity and profound shortcomings of global institutions apply not only to global finance, but to other looming systemic risks in the future. Neither the current global governance system, nor the planned reforms, meet the test of addressing new global systemic risks. Global governance requires radical structural changes in existing institutions and the development of new global institutions that reflect the realities of new global power balances and address the forces of systemic risk in the 21st century.

Mainstreaming Adaptation to Climate Change in Agriculture and Water Sectors in India: Current Status, Issues and Barriers

This paper presents available evidence for climate change impacts in India and discusses issues and barriers that make mainstreaming adaptation difficult in agriculture and water sectors in India. Evidence suggests a wide range of climate change impacts in Indian agriculture and water sectors. Most important ones being severe reduction in crop production due to a combination of factors such as warming, incidence of pests and diseases, changes in rainfall patterns, and reduction in freshwater sources for irrigation. Information that is useful for initiating action by various stakeholders involved in agriculture and water sectors is very poor. Lack of vulnerability assessment tools, awareness at the extension level, focused research, financial and human resources, political and institutional rigidity, inaccessible data, and absence of proper knowledge management systems are some of the key barriers. Overcoming these barriers requires a set of policies, institutional reforms and investments in capacity building, and deploying tools for vulnerability and risk assessments and for monitoring and evaluating adaptation interventions.

Housing Mobility and Downsizing at Older Ages in Britain and the United States

This paper examines geographic mobility and housing downsizing at older ages in Britain and America. Americans downsize housing much more than the British largely because Americans are much more mobile. The principal reasons for greater mobility among older Americans are two fold: (1) greater spatial distribution of geographic distribution of amenities (such as warm weather) and housing costs and (2) greater institutional rigidities in subsidized British rental housing providing stronger incentives for British renters not to move. This relatively flat British housing consumption with age may have significant implications for the form and amount of consumption smoothing at older ages.

On Becoming a Psychoanalyst

In this autobiographical study by the daughter of two prominent psychoanalysts, Wilhelm Reich and Annie Reich, the author describes the factors that led to her decision to join the same profession as her parents'. The traumatic histories of both parents, as well as her own experience of living through World War II and her immigration to America, led to the author's conviction that trauma leads to conflicts involving fantasy and defenses that are incorporated into character structure. Noting the changing attitudes about the importance of trauma in psychoanalytic theory, she comments on the challenges to orthodoxy and institutional rigidity and discusses the different theoretical perspectives and ensuing shifts in the conception and handling of transference. Eventually, through participation in intimate and candid study groups, she begins to incorporate many theoretical trends into her clinical work. She ends with a plea for acceptance of diverse theories, which, she believes, enables growth and new enthusiasm in the field.

Managing national security and law enforcement intelligence in a globalised world

AbstractThis article argues that there are five major challenges currently facing Western intelligence communities. First – ensuring skills retention for intelligence officers and analysts, while developing knowledgeable managers and customers, all in an increasingly-complex security environment. Second – instituting and inculcating knowledge and expertise in these staff – while addressing an opponent in al-Qaeda which demonstrates increasingly sophisticated use of IT, new media, etc. Third – drawing-in outside expertise from the research and business communities, as is done currently in the US and Canada but in only a very limited manner in the UK. Fourth – overcoming institutional rigidity in dividing the foreign and domestic – alongside rigid sharing and co-operation relationships. Fifth – creating truly collaborative environments that offer genuine socio-cultural incentives to collaboration rather than mere ‘IT solutions’.

Does institutional quality affect capital mobility? Evidence from developing countries

AbstractThis paper uses an augmented Feldstein–Horioka savings–investment methodology to examine the impact of institutional quality on the degree of capital mobility in developing countries. A high correlation between domestic investment and domestic savings can arise from the presence of institutional rigidities restricting the movement of capital across borders. We find that including different aspects of institutional quality raises the coefficient of the savings rate, implying lower capital mobility. However, the improvement in institutional quality that strengthens the legal system, reduces investment risks, and ensures democratic accountability, increases capital mobility in developing countries. Inclusion of foreign aid also has a positive impact on the coefficient of the savings rate.

Endogenous gradualism and the Slovenian puzzle

Abstract We use EBRD transition index to classify transition countries into gradualist and orthodox reformers. When comparing this classification with records of economic and political reforms before the breakdown of socialism, an apparent historical regularity emerges. Countries where transition was to an extent »endogenous« were more likely to choose a gradualist strategy, whereas countries where a strict socialist regime was upheld until its breakdown, were more likely to decide for an orthodox »big-bang« approach to transition. Some political economy explanations for this regularity are suggested. The second part of the paper explores Slovenia's experience in some detail. We present the discussion on the benefits and pitfalls of its gradual approach to reforms, showing that gradualism may slow down important structural reforms in the second phase of transition and thus negatively affect competitiveness and the long-run growth performance of a country. Moreover, since the gradualist approach to transition has increased institutional rigidity and created a kind of political economic equilibrium, an »endogenous« changeover to a more dynamic reform agenda is unlikely. We report on the recent more ambitious structural reforms agenda introduced in the country and conclude that it amounts to merely a »gradual move away from gradualism«. We conclude by offering some tentative political economy interpretations of these developments.

Japan's Financial Crisis: Institutional Rigidity and Reluctant Change ‐ by Jennifer A. Amyx

The article reviews the book Japan's Financial Crisis: Institutional Rigidity and Reluctant Change, by Jennifer A. Amyx.

China and India: The Institutional Roots of Differential Performance

ABSTRACTAt the start of the so‐called development race sixty years ago, China, showcasing revolutionary socialism, and India, boasting parliamentary democracy, had close similarities in economic structures and levels of development, but striking differences in terms of cultural cohesion, institutional flexibility and political orientation. The outcome of the race is unambiguous: the question is not who won, but why and how? It is argued here that a wide margin had already opened up in China's favour by the time of the systemic or policy‐regime switch‐points, 1978 in China, and shortly thereafter in India. The author seeks explanations for this differential performance in the divergent institutional configurations of the two societies and economies, especially in the rural sector in the pre‐reform period, and highlights the contrast between the power of the Chinese mass mobilization mode of transformation and the persistent institutional rigidities and obstacles in the Indian case. Post‐reforms, processes of ‘pervergence’— an emerging congruence in negative social features — appear to dominate over tendencies towards conventional convergence. The author reflects on the historical significance of the two development paths: did Nehruvian state‐led planned development and Maoist socialism serve essentially as pioneers of capitalism, leveraging the re‐launching of the two once‐powerful Asian giants back into the global capitalist game on dramatically revised terms of engagement?

Student Leadership in Selected Public Universities in Kenya: Disfranchised Pressure Groups or an Integral Component in University Management?

This paper was based on an exploratory study carried out on student leadership in three public universities in Kenya in 2004/2005 academic year. The study was premised on the challenges facing student leadership and the transformative roles student leadership plays in the management of student affairs and overall university management. Data were collected using a self-administered questionnaire from a sample of 34 student leaders and analyzed through descriptive statistics. Findings showed that most student leaders were first born in their families. Most of the students' parents were in low to middle level occupational category in the public sector, with about 50% of them having attained at least some college training. Most of the students resided in urban centers, with a significant majority coming from the major urban centers in the country – namely, Nairobi, Kisumu, Eldoret, Nakuru and Nyeri. Student leaders were prompted to leadership interests by many factors, including past leadership experience in high school, service to students, a learning experience, and to develop a culture of dialogue with university management. Despite these values and intentions, student leaders still faced many challenges in their efforts to achieve the intended goals. This ranged from institutional rigidities, high student expectations and skepticism, betrayal from students' body, low participation rates by female students and tribalism/regionalism. This study observed the transformative nature of student leadership compared to what it was two decades ago and encouraged that student leadership is an integral component of modern university managementAfrican Research Review Vol. 2 (3) 2008: pp. 195-221

Institutional Rigidities and Employment Rigidity on the Italian Labour Market

A well-established result in the theoretical literature on labour market flexibility is that the employment should be more volatile in “flexible” labour markets. Over the last 35 years, Italy gives a good example of a transition from an over-regulated labour market into a quite more flexible one. According to the theory, the deregulation is expected to increase the employment variance. Despite the anecdotal evidence reported in the press, the literature hardly finds any evidence for such an effect. This paper exploits time-series of several employment indicators since 1980, allowing us to compare decades with different labour market regulation. All the considered series show evidence of a structural break with an increase in their variance after the deregulation, confirming the expected pattern. This gives some support to the concerns for increased job insecurity.

Transatlantic Differences in Labour Markets: Changes in Wage and Non-Employment Structures in the 1980s and the 1990s

Rising wage inequality in the U.S. and Britain and rising continental European unemployment have led to a popular view in the economics profession that these two phenomena are related to negative relative demand shocks against the unskilled, combined with flexible wages in the Anglo-Saxon countries, but institutional rigidities in continental Europe('Krugman hypothesis'). This paper tests this hypothesis based on seven large person-level data sets for the 1980s and the 1990s. I use a more sophisticated categorisation of low-skilled workers than previous studies, which highlights the distinction between German workers with and without apprenticeship training. I find evidence for the Krugman hypothesis when Germany is compared to the U.S. However, supply changes differ considerably between countries, with Britain experiencing enormous increases in skill supply explaining the relatively constant British skill premium in the 1990s.

Japan's Financial Crisis: Institutional Rigidity and Reluctant Change. By Jennifer A. Amyx. Princeton, N.J.: Princeton University Press, 2004. xix, 365 pp. $57.50 (cloth); $24.95 (paper). Unmaking the Japanese Miracle: Macroeconomic Politics, 1985–2000. By William W. Grimes. Ithaca, N.Y.: Cornell University Press, 2001. xix, 254 pp. $22.95 (paper). Japan's Fiscal Crisis: The Ministry of Finance and the Politics of Public Spending,

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Social structure and land markets in late medieval central and east-central Europe

ABSTRACTRecent research on the development of peasant land markets and transfer patterns for central and east-central Europe concentrated on the early modern period. For the late Middle Ages, rural history still relies on older approaches studying the general development of ‘agrarian structure’ (Agrarverfassung) and peasant ‘inheritance’. This article seeks to establish the basis for a more systematic analysis of the formation and general development of peasant land markets in late medieval central and east-central Europe in a comparative perspective. Apart from changes weakening traditional manorial structures, secure peasant property rights of hereditary tenure developed and prevailed by the later Middle Ages. Possible institutional rigidities of transactions with peasant farmland, whose effects in practice would need further exploration, were undermined by the existence of reserves of land situated outside the measured open fields of peasant farms that could be traded more flexibly. These areas also formed important resources for the establishment of smallholders and cottagers who in turn added to the dynamics of developing peasant land markets. In the final section, the article offers a brief survey of developments during the early modern period and concludes that traditional images of an undermining of peasant property rights and of massive landlord powers due to the rise of ‘demesne lordship’ (Gutsherrschaft) must be seriously questioned, as recent empirical studies highlight enormous regional variation and a dominant pattern of continuity of secure peasant property rights and also indicate considerable land mobility.

MIND THE GAP: UNEMPLOYMENT IN THE NEW EU REGIONS

AbstractThe paper surveys the theoretical and empirical literature on regional unemployment during transition in Central and Eastern Europe. The focus is on optimal speed of transition (OST) models and on comparison of them with the neo‐classical tradition. In the typical neo‐classical models, spatial differences essentially arise as a consequence of supply side constraints and institutional rigidities. Slow‐growth, high‐unemployment regions are those with backward economic structures and constraints on factors mobility contribute to making differences persistent. However, such explanations leave the question unanswered of how unemployment differences arise in the first place. Economic transition provides an excellent testing ground to answer this question. Pre‐figuring an empirical law, the OST literature finds that the high degree of labour turnover of high unemployment regions is associated with a high rate of industrial restructuring and, consequently, that low unemployment may be achieved by implementing transition more gradually. Moreover, international trade, foreign direct investment and various agglomeration factors help explain the success of capital cities compared to peripheral towns and rural areas in achieving low unemployment. The evidence of the empirical literature on supply side factors suggests that wage flexibility in Central and Eastern Europe is not lower than in other EU countries, while labour mobility seems to reinforce rather than change the spatial pattern of unemployment.