Incompatibilities: When Internal and External Institutions are not in Sync

Nadia von Jacobi (University of Trento)
Stefan Voigt (University of Hamburg)

Abstract

Informal – or internal – institutions have been claimed to be crucial for development. As a consequence, their necessity to be aligned with formal – or external – institutions has been discussed. In this paper, we add to the literature by distinguishing the compatibility from the complementarity of institutions and propose proxies for measuring both. We further inquire into the sources of non-compatibility and non-complementary and find that countries with a high level of ethnolinguistic fractionalization and with major influence of foreign powers (in particular having been subject to IMF conditionality) tend to suffer from both incompatible and non-complementary institutions. Being a democracy is correlated with higher levels of compatibility. Complementarity, in turn, tends to be higher under systems relying on proportional representation.

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