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This chapter develops a causal model for explaining the performance of liberal democracies. The model builds on explanatory models from three theoretical strands: comparative research on democracy, comparative public policy, and the veto player approach advocated in the context of the new institutionalism. It integrates formal and informal institutional factors as well as the three most-important non-institutional factors for explaining performance: the national level of wealth, the ideological orientation of the government, and the openness of the economy. The causal relationship between these factors is conceptualized on the basis of rational choice institutionalism. Furthermore, this chapter includes a discussion of the constitutional and partisan veto-player indices for measuring institutions. It concludes with a set of specific hypotheses on the effect of formal and informal institutions on political effectiveness.

This chapter examines the hypotheses about the impact of formal and informal institutions on the level, stability, and the structure of political effectiveness of western democracies. It presents a re-analysis of Arend Lijphart's Pattern of Democracy (1999) and investigates the validity of various veto player indices. It is shown that political institutions do matter, but formal and informal institutions cause different effects; both matter only sometimes and only to a limited degree.

Post-conflict reconstruction strategies typically focus on identifying and repairing formal governing institutions and physical infrastructures, and tend to ignore the informal arrangements that sustain people over years of state failure. This paper shows how informal institutions were critical to the survival of local people during state collapse and violent conflicts in Liberia. It argues that there are very healthy informal arrangements that can become important building blocks in post-conflict governance arrangements if used to buttress formal institutions, and that unlocking such capital is important in enabling people to make transitions from short-term survival strategies to more productive long-term arrangements. Failure to recognize these assets have frequently led to the presumption of a social capital deficit and, therefore, the need to look externally for such a resource.

This chapter examines the role of informal institutions in economic transition. It argues that informal institutions complement formal institutions in reducing the costs of transactions and describes the formulation of a model of institutional change. It proposes three possible reform strategies which form the basis for the typology of patterns of institutional change in transition economies. The first reform strategy emphasizes the stability of the formal institutional framework with only gradual changes in laws and regulation. The second strategy involves changing at one stroke the formal institutional framework to conform fully to the basic requirements of a new economic system. The third strategy accepts the limited capability of government in most transition economies. Institutional design is guided by political feasibility. This chapter argues that only China and East Germany fulfilled the condition of a strong state necessary for the adoption of the first or second strategy. Most other transitions fall into the third category.

This chapter begins by noting that the state offers numerous faces, from the great rituals it enacts to the opaque daily transactions of its multiple bureaucracies. It also stresses that those faces of the state vary substantially depending on the social position of those it interacts with, especially in countries marred by deep inequality and extensive poverty. These multiple faces make it difficult to find and reconstruct theoretically the underlying unity of the state, which has led several currents to deny it; the chapter argues that such unity derives from the cascade of legal authorizations that result from the legal system of the state. Furthermore, against what some legal and democratic theories presume, even under democratic regimes, in some countries the state, especially as a legal system, may be absent in sometimes extensive regions (brown areas) and in relation to some social sectors. On a related matter, the chapter discusses some legal aspects of the expansion of capitalism, including the features it has had on countries outside of the Northwest.

This chapter provides a conclusion and comprises summarized findings. In addition, this chapter addresses a serious challenge that faces most students of institutions: Are institutions epiphenomenal? It argues that rural China’s experiences under the Chinese Communist Party regime confirm the significant influence of institutions on its governance which cannot be fully attributed to the institutions simply transmitting the impact of structural conditions. This chapter also provides suggestions on how to adequately contextualize our understanding of institutional change and its consequences. Particularly, it emphasizes the necessity of establishing a comprehensive framework to examine the possible dynamics among different types of institutions and moving beyond the institutional environment by bringing in the pertinent social environment. This chapter further discusses the broader implications of this research for the literature on formal and informal institutions, institutional change, local governance, and social capital.

Many analyses of long-term development neglect the importance of formal and informal political and economic institutions in developing countries. This chapter discusses the nature of such institutions, their endogeneity and persistence over time as well as their impact on growth, inequality, and political stability. The chapter places particular attention on the institutions that build the market and facilitate economic exchange, and on the public organizations mandated with their enforcement. It then discusses their impact on growth and macroeconomic stability as well as the role played by informal institutions in developing countries where formal institutions are often perceived as a costly obstacle to economic development.

This chapter analyses a semi-feudal context marked by an informal governance system controlled by a dominant caste community. Dalit women cultivators here are engaged in an on-going struggle to secure agricultural land title. The struggle demonstrates the interaction between formal and informal institutions, which produces competing notions of rights, entitlements, and obligations. In particular, informal power holders seek to preserve patronage relations within a shifting socio-political context by influencing state entitlement arrangements. This creates distinct strategic pathways for Dalit women to secure entitlements: they turn to state institutions in order to advance their claims while simultaneously delinking from informal institutions. An analysis of the organisational and collective action strategies in this adverse environment indicates the ways in which women negotiate multiple layers of relations and interactions in claiming value-laden resources such as land. In order to do this, external brokerage is necessary to overcome the women’s knowledge/power limitations.

This chapter argues that despite the voluminous literature on Chinese politics we actually know very little about how the Chinese one-Party state works, and how it has held together through decades of tumultuous social, economic and political change. In a political system in which personal power relations trump formal rules, the chapter argues that more attention must be given to the role of informal institutions in governing political behavior. The chapter outlines the approach and methodology used to examine informal institutions in Chinese politics and the significance of the findings. It argues that understanding the unwritten rules of Chinese officialdom in this corner of China can help us to understand the resilience of the one-Party state.

This chapter establishes the link between knowledge economy and institutional capital. The various sections of the chapter deal with the meaning and definitions of institutions, formal and informal institutions, and micro and macro implications of institutions.

From banking standards to data privacy, regulation has entered the lexicon of international affairs. Unlike trade or currencies, however, there are few formal treaty-based international organizations resolving disputes or setting the rules for the world. Instead, global regulation is frequently shaped by informal networks of regulators or at times by the extraterritorial extension of domestic law by large markets. Drawing on work from historical institutionalism, this chapter argues that the global politics of regulation is in important respects the product of domestic and international institutions interacting over time and across space. In developing three mechanisms—relative sequencing, cross-national layering, and transnational feedbacks—the chapter argues that historical institutionalism helps address lacunae in extant approaches to global regulation.

Institutions and ownership play a central role in the transformation and development of the beer market and the brewing industry. Institutions set the external environment of the brewery through both formal requirements and the informal acceptance of these companies’ operations by the public, whereas the owners and their managers adapt to these external challenges but also follow their own agenda in setting up strategies for innovation, marketing, takeovers, and so on. The thirteen chapters in this book cover changes in a range of areas, such as excise tax, zoning regulation, trade liberalization, consumers’ habits and tastes for beer, and sales regulation of alcohol. Breweries’ responses have included a craft beer revolution with a surge in demand for special flowered hops, a globalization strategy from the macrobreweries, outsourcing by contract brewing, and knowledge exchange for small-sized breweries, among others.

This chapter examines the role of informal tools in coalition management. Informal tools are understood as the ‘exchange of favours’: access to electoral resources, favourable state treatment of allies’ business interests, the conferral of lucrative or influential positions outside of the legislature and the cabinet, and, in some cases, illicit forms of exchange. It discusses the costs associated with these tools (financial, political, personal, public), and the factors that exacerbate or mitigate these costs: system-level factors (rule of law and personal-vote electoral systems), coalition-level factors (coalition size and congruence with the cabinet coalition), and conjunctural factors (proximity to the next election). The ways in which presidents deploy this tool are illustrated with detailed examples from Ecuador, Armenia, and Kenya. Finally, data from surveys of MPs are analysed to illustrate the relative costs of deploying the exchange of favours under different country conditions.

That illegal markets thrive is something of a puzzle to sociology. Despite the lack of legal frames—crucial for conflict resolution, regulation of competition, and formal sources of credit—new illegal markets continue to emerge. Thus an analysis of informal social mechanisms is essential for a better understanding of illegal markets’ internal coordination. The main goal of this chapter is to dissect the role of one of these mechanisms—state-sponsored protection rackets—in the context of illegal markets. This type of protection racket means a selective non-enforcement of the law, an action carried out intentionally by politicians and police forces in order to capture economic resources. I provide evidence that such an informal mechanism is present on a massive scale at La Salada, a huge illegal and informal marketplace close to Buenos Aires city center. The chapter seeks to make a contribution on informal mechanisms fostering unlawful exchanges.

Given the importance of forests in the livelihoods of the hill people, there are a number of institutional arrangements that exist at the village level apart from the state-sponsored van panchayats. A survey of about a four villages in the hills presented here (from a study of about a dozen villages) brings out the diversity of institutions, tenure and rights, as against a uniform model of institutional arrangement for the involvement of communities in conservation, that is preferred by governmental organizations and aid agencies. In contrast to the popular advocacy of one or the other property regimes of state, market, or community in conservation, I will point to cases where villages have evolved successful models using a combination of strategies, for example, community and state, and community, state, and privatization. On the basis of empirical data, I will argue for the necessity to evolve a flexible model that is sensitive to the characteristics of particular village economies, resources, institutions, and capabilities for making the programme of communities in conservation more effective.

The analysis of popular political values provides a key for understanding the day-to-day functioning of democracies. This chapter argues for the relevance of culture at both mass and political elite levels, with media functioning as a crucial interlocutor between the two. The author examines and compares the democratic cultures of old and new EU member states in order to assess their resilience to competing informal practices, arguably one of the most serious threats to liberal democracies, and more generally to demonstrate why culture matters for analysing the relationship between media and politics. This chapter demonstrates that Central and Eastern European (CEE) countries do not fall into a single and unique post-communist cultural category, but are distributed along a continuum encompassing older EU democracies. However, in the ‘average’ CEE democracy, informal rules and practices compete with formal rules and laws in defining everyday interactions between political, business, and media elites.