Institutions, Trade, and Social Cohesion in Fragile States

Mina Baliamoune

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: This paper examines the contribution of institutions, social cohesion, and trade to development (per-capita income) with emphasis on fragile states in Africa. Results from GMM estimations suggest that political institutions, openness to trade, and social cohesion affect growth in fragile states via direct and indirect mechanisms. The results indicate that, beyond a certain level, openness to trade may actually be harmful to economic performance in fragile states, particularly in countries with high export concentration. Improvements in institutional quality, or more specifically in democratization, also may be harmful in the short run. On the other hand, social cohesion has a positive effect once a threshold level is reached. The results associated with the effects of political institutions and openness to trade seem to suggest the possibility of a ‘catch-22’, at least in the short run. If a fragile state tries to improve its political institutions or its openness to trade it may wind up with lower per-capita income. According to the formula used to allocate World Bank-IDA funds get more money, such country would get more aid. However, while obtaining more aid may be a good outcome lower income implies more poverty (assuming no changes in income distribution). Thus, aid may not lead to significant poverty reduction.

Keywords: fragile states; aid effectiveness; institutions; social cohesion (search for similar items in EconPapers)
JEL-codes: E61 F35 F43 O19 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Institutions, Trade, and Social Cohesion in Fragile States (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:icr:wpicer:24-2007

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