Capitalist Diversity, Legal Origins, and Non-Independent Pasts: The Effects of Institutional Settings on Economic Performance

Abstract

This study explores the role of institutional settings, in their path dependence, stability and complementarity, in determining aggregate economic performance at the country-level. Cross-country differences in institutional design are operationalised in this study as national institutional settings: firstly as institutional configurations in the Varieties of Capitalism framework and secondly, as the interaction between formal institutions such as a modern capitalist state’s legal origins and informal institutions such as its non-independent past. Empirical findings from a panel data of 24 countries for the period 1995–2019 show that national institutional settings such as family market economies, mixed market economies, and the interaction between a country’s non-independent past and transplanted French legal origin, have significant and negative relationships with economic performance. Policy recommendations focus on addressing adverse macroeconomic consequences brought on by the predominance of entrenched elite groups, traditional patron-client relationships, and detrimental patronage networks. JEL Classifications: F54 Colonialism; Imperialism; Postcolonialism, O43 Institutions and Growth, P16 Political Economy, P48 Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies