Why Institutions Endure: Norms, Leadership, and the Difficulty of Reform

Omer Majeed

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: How do institutions evolve? Why are they so persistent? And why are successful institutional transformations so rare, limited to outlier cases like Singapore, Turkiye, South Korea, Botswana, and China? This paper presents a new framework linking long-term institutional outcomes related to corruption and extractive practices to the dynamic interaction between population norms and leadership traits. The Population-Leadership Symmetry Principle posits that leadership traits reflect prevailing societal norms, as leaders emerge from within the population. Yet, meaningful institutional transformation requires a second mechanism: the Leadership Hysteresis Effect, where sustained, reformist leadership reshapes societal norms, embedding institutional change that persists beyond the leader's tenure. In both mechanisms, societal norms play a central role. For the Hysteresis Effect in particular, institutional reform depends on stability over time to gradually shift these underlying norms. In this framework, only long-duration and intensive leadership episodes generate durable improvements in governance; the model also explains why these reform episodes are rare. The model is calibrated to notable cases of institutional transformation. Empirically, I test the model using panel data and event studies, showing that societal corruption norms are strongly associated with leadership integrity over time. However, the absence of a valid external instrument limits causal inference; accordingly, the results are best interpreted as evidence of association rather than causation. Even so, the findings are robust across specifications and consistent with the model's predictions. Together, the findings offer a unified explanation for both institutional persistence and the conditions under which rare but lasting reform is possible.

Keywords: Institutions; societal norms; development; leadership; economic growth (search for similar items in EconPapers)
JEL-codes: D73 H83 O43 O57 P10 Z18 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2025-06
New Economics Papers: this item is included in nep-pke
References: Add references at CitEc
Citations:

Downloads: (external link)
https://crawford.anu.edu.au/sites/default/files/2025-07/36_2025_Majeed_0.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2025-36

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().