The Quality of Government - scholar.harvard.edu · The Quality of Government ... effective...

222 JLEO, V15 N1

The Quality of Government

Rafael La PortaHarvard University and NBER

Florencio Lopez-de-SilanesHarvard University and NBER

Andrei ShleiferHarvard University and NBER

Robert VishnyUniversity of Chicago and NBER

We investigate empirically the determinants of the quality of governments in a largecross-section of countries. We assess government performance using measuresof government intervention, public sector efficiency, public good provision, sizeof government, and political freedom. We find that countries that are poor, closeto the equator, ethnolinguistically heterogeneous, use French or socialist laws, orhave high proportions of Catholics or Muslims exhibit inferior government perfor-mance. We also find that the larger governments tend to be the better performingones. The importance of (reasonably) exogenous historical factors in explain-ing the variation in government performance across countries sheds light on theeconomic, political, and cultural theories of institutions.

1. Introduction and OverviewIn recent years economists have stressed the idea that good economic insti-tutions, particularly those in the public sector, are instrumental to economicgrowth. Some of such institutions include limited government, a relatively be-nign and uncorrupt bureaucracy, a legal system that protects property rights andenforces contracts, and modest taxation and regulation. Good government hasbeen shown to contribute to the economic development of European countriesover the last millennium (North, 1981; De Long and Shleifer, 1993), to growthacross countries over the last 40 years (Knack and Keefer, 1995; Mauro, 1995;Easterly and Levine, 1997), and to the successful transition from socialism tocapitalism (Weingast, 1995; Johnson, Kaufmann, and Shleifer, 1997). The im-

The authors are extremely grateful to Alberto Alesina, Robert Barro, Olivier Blanchard, ColinCamerer, Brad DeLong, Edward Glaeser, Claudia Goldin, Simon Johnson, Lawrence Katz, DavidLaibson, David Landes, Daniel Treisman, and Lynn Zucker for discussions of this article, and toTatyana Nenova for research assistance.

c© 1999 Oxford University Press

The Quality of Government 223

portance of good government for growth thus appears to be a well-establishedempirical proposition.

This proposition raises an obvious question: How did some countries cometo have good government and others did not? How does history influence gov-ernment performance? In this article we address these questions using dataon government performance and its possible determinants for a large sampleof countries. We present, and evaluate empirically, a number of theories thatfocus on economic, political, and cultural determinants of government perfor-mance.

As a first step, it is important to agree on what constitutes “good govern-ment.” We use the term “good” in this article to stand for good-for-economic-development. One can alternatively consider good government performanceto manifest itself in lower inequality, greater diversity among people, or main-tained traditions, but here we keep the narrow view. Even in this narrow view,however, there are many distinct dimensions of good government performance.Following Montesquieu (1748) and Smith (1776), economists have focusedon the security of property rights—lack of intervention by the government,benign regulation, low taxation—as the crucial metric of good performance.Other signs of well-functioning government include high quality of the bureau-cracy, successful provision of essential public goods, effective spending, anddemocracy—which is both an end in itself and a mechanism for modifyinginstitutions. In this article we examine all these separate dimensions of thequality of government.

The theories of determinants of institutional—and more specificallygovernment—performance fall into three broad categories: economic, polit-ical, and cultural. We treat these groups of theories as sharply distinct, eventhough their advocates would surely accuse us of caricaturing their views. Eco-nomic theories (Demsetz, 1967; North, 1981) hold that institutions are createdwhen it is efficient to create them, that is, when the social benefits of buildinginstitutions exceed the transaction costs of doing so. Thus private propertyrights over land are created when land becomes scarce, and when the costs ofenforcing such rights fall below the benefits. Political theories (Marx, 1872;North, 1990; Olson, 1993), in contrast, focus on redistribution rather than effi-ciency, and hold that policies and institutions are shaped by those in power tostay in power and to transfer resources to themselves. For Marx, the interestsin power are identified with “class,” but they can also be autocrats, autonomousbureaucracies, organized religion, ethnic groups, or even particular organizedeconomic interests (the nobility, state enterprises, or even retirees). Accord-ing to political theories, government policies are inefficient not because theyare expensive to fix, but because their creators want them so. Finally, accord-ing to cultural theories (Banfield, 1958; Weber, 1958; Putnam, 1993; Landes,1998), societies hold beliefs that shape collective action and government. Somesocieties are so intolerant or distrustful that their governments simply cannotfunction effectively.

To evaluate the ability of the different theories to explain the variation in gov-ernment performance across countries we need to find (reasonably) exogenous

224 The Journal of Law, Economics, & Organization, V15 N1

sources of variation in the economic, political, and cultural characteristics ofthese countries. Begin with economic theories. Perhaps the most direct impli-cation of these theories is that as the scale of economic activity expands, betterinstitutions become affordable, and hence government performance should im-prove (North, 1981). Of course, better government in turn improves economicperformance, so the scale of economic activity is endogenous. It turns out to betrue that richer countries have better government, but this is hardly the wholestory.

With political and cultural theories we have better exogenous measures ofcountry characteristics. We use two strategies for evaluating political theories,the essence of which we take to be that political divergence in society—betweensocial, ethnic, class, or other interests—is detrimental to government perfor-mance. One strategy is to look at ethnic heterogeneity in a country, whichseveral recent studies have identified as an important exogenous measure of re-distributive tendencies (Alesina, Baqir, and Easterly, 1999; Easterly and Levine,1997). Another strategy is to look at the legal systems, which can be viewedas indicators of the relative power of the State vis-`a-vis property owners. Inparticular, common law has developed in England to some extent as a defenseof Parliament and property owners against the attempts by the sovereign toregulate and expropriate them. Civil law, in contrast, has developed more asan instrument used by the sovereign for State building and controlling eco-nomic life. Finally, socialist law is the expression of ultimate control of theeconomy by the State. We consider a country’s legal system as a potentialdeterminant of government performance. In this article we do not use standardpolitical variables—parliamentary versus presidential system, fragmentation ofthe parliament, democracy versus dictatorship—as independent determinantsof government performance because, from our perspective, these variables arelargely endogenous.

To examine cultural theories, we follow a variety of authors, from Weber toLandes, who use religion as a proxy for work ethic, tolerance, trust, and othercharacteristics of society that may be instrumental in shaping its government.We look at the religious affiliations of the population as the potential culturaldeterminants of performance, and in particular focus on the Catholic and Mus-lim religions which have been recently singled out by Landes (1998) as hostileto institutional development.

Our data show a strong positive association between per capita income andgovernment performance, but they also suggest that economic theories of insti-tutions are not the whole story. To a significant extent, government performanceis determined by political, and perhaps also cultural, factors. We find that eth-nolinguistic heterogeneity and the use of a more interventionist legal system,such as socialist or French civil law, predict inferior government performance.So do significant shares of Catholics or Muslims in the population. The influ-ence of religion on government performance has a number of political, as wellas cultural, interpretations.

In the next section we spell out the different theories and their potentiallytestable predictions. In Section 3 we describe our data and empirical strategy.


In section 4 we present the main results bearing on the alternative theories.Section 5 concludes.

2. Theories of Institutional Development2.1 Measuring Government Performance

The government shapes the economic life of a country in a variety of ways:protecting or grabbing property, allowing or suppressing dissent, serving orabusing the public through its agents. To begin understanding what explainsthe variation in government performance across countries, our first step is todescribe some of the dimensions of such performance.

Perhaps the most standard view is that a good government protects propertyrights, and keeps regulations and taxes light; that is, a good government isrelatively noninterventionist (Smith, 1776; North, 1981; Knack and Keefer,1995). Our first group of measures, therefore, focuses on interventionism, andspecifically on the quality of regulation and the security of property rights. Onearea where the interpretation of interventionism is ambiguous is taxation. Inone view, high taxation is a measure of high intervention. In another view, hightax rates are imposed with the consent of the governed to finance sought-afterpublic goods, whereas low taxes are all that a deeply interventionist governmentcan hope to collect. Recent interpretations of higher taxes in Britain than inFrance in the 18th century (Brewer, 1988; Finer, 1997), as well as the evidenceon transition from socialism (Johnson, Kaufmann, and Shleifer, 1997), areconsistent with the notion that higher tax rates may go hand in hand with betterinstitutions.

Noninterventionism is only one aspect of good government. A further im-portant, and separate, dimension can be described as the efficiency of govern-ment, or the quality of the bureaucracy (Rauch, 1995; Rauch and Evans, 1997).When a government intervenes, it can do so reasonably efficiently, or with de-lays, corruption, and other distortions (Mauro, 1995; Treisman, 1997). Whena government taxes, it can do so with relatively high compliance, or with lowcompliance, which often leads to corruption and arbitrary variation of effectivetax rates across similarly situated taxpayers. On average, greater interven-tionism should be associated with lower efficiency, since entrusting officialswith greater regulatory and taxing powers invites corruption and bureaucraticdelay (Shleifer and Vishny, 1993). Nonetheless, some bureaucracies delivera given bundle of interventions more efficiently than others. There are manyexamples indicating that interventionism and efficiency are not just mirror im-ages of each other. The government in 18th-century Britain was efficient bythe standards of the day and (outside of taxation) relatively noninterventionist,whereas the government of Frederick the Great of Prussia was also efficient, buthighly interventionist (Johnson, 1975; Ertman, 1997). The Giolitti governmentin Italy before World War I was highly corrupt and inefficient, but relativelynoninterventionist; under Mussolini, the government became much more inter-ventionist while keeping its low efficiency levels; under Christian Democratsafter World War II, interventionism was reduced while the efficiency levelswere maintained (Mack Smith, 1997). In theory, it may help development for a


highly interventionist government to be inefficient (Huntington, 1968). In anyevent, interventionism and efficiency are in part distinct aspects of governmentperformance.

In addition to controlling, taxing, regulating, and charging bribes, govern-ments in many countries actually provide public services that are essential foreconomic development. Government performance of a given country shouldbe assessed in part by evaluating the quality of public good provisions such asschooling, infant mortality, literacy, and infrastructure. While some of thesegoods are in part provided privately, governments have come to play a largerole in delivering health, education, and infrastructure. High quality of thesegoods, as opposed to just high expenditures, is a sign of a well-functioninggovernment.

A more problematic, but nonetheless important, indicator of performance isgovernment expenditures on transfers, its own consumption, and public sectoremployment. High government expenditures in these areas may reflect the citi-zens’ willingness to pay taxes because they like what the government does, andas such reflect good government. Alternatively, high expenditures on transfersand subsidies or on government consumption may reflect high levels of distor-tionary taxes and redistribution (Barro, 1991), and hence represent a failure toprotect the public from state intervention. Some measures of the size of gov-ernment, such as the size of the state-owned enterprise sector and the relativesize of public sector employment (Shleifer and Vishny, 1994, 1998), are per-haps more indicative of political and redistributive, rather than public-spirited,intent. Examining the determinants of these types of government spending maythus help us distinguish alternative theories of institutions.

A final dimension of good government which we examine is democracyand political rights. We look at this both because political freedom is a cru-cial element of good government and because economic freedom generallygoes together with political freedom (Hayek, 1944). The relationship betweendemocracy and economic success has been difficult to find in recent data (Barro,1996b), although over the longer span of history more limited governments havepresided over more successful development (DeLong and Shleifer, 1993).

2.2 Theories of InstitutionsEconomists, historians, sociologists, and political scientists have developed alarge number of theories of institutional development. Unfortunately, scholarsoften pursue their own theories without paying too much attention to the al-ternatives. This is true, for example, of Marx (1872), Weber (1958), Demsetz(1967), North (1981, 1990), Putnam (1993), Fukuyama (1995), and Landes(1998). Our goal is to provide some evidence that illuminates, and perhapscan distinguish, alternative theories of institutions and their implications forgovernment performance. To this end we first organize these theories (withoutpresenting any new ones) and then present their possibly testable implications.

We divide the available theories into three broad categories: economic, po-litical, and cultural. These theories focus on different reasons why institutionslook the way they do: social efficiency needs in the case of economic theories,


redistribution toward powerful groups in the case of political theories, and socialbeliefs in the case of cultural theories. Yet all these theories are consistent witheconomics more broadly in the sense that political actors pursue their selfishobjectives in light of their beliefs. Even so, this division is probably too crude,and the writers we examined—most notably North—typically have economic,political and cultural elements to their stories.

Economic theories of institutions suggest that they are created whenever thesocial benefits of doing so exceed the costs (Demsetz, 1967; North, 1981).1

For example, a government protects private property when the returns to suchprotection exceed the cost of police. This theory generally takes the view thatinstitutions are efficient, and that the trouble is the absence of institutions, ratherthan the existence of bad ones. Even if this theory is an important part of reality,it is at best incomplete—we see too many extractive and inefficient governmentsaround (Bates, 1981; Olson, 1996; Finer, 1997; Shleifer and Vishny, 1998).

A second group of theories of institutions is political; they state, roughly,that institutions and policies are shaped by those in power to stay in power andto amass resources. Government policies are used to control assets, includingpeople, and to convert this control into wealth.2 To Marx, societies are dividedinto social classes, and policies are designed by the ruling class. Moderntheories are more nuanced and allow redistributive policies to be shaped bysovereigns, bureaucracies, ethnic groups, religions, or even particular lobbies.Thus the Mandarin bureaucracy shaped the Chinese government for its own andthe emperor’s benefit for hundreds of years, and the Communist bureaucracyin the USSR did the same during Soviet rule. What political theories havein common is the idea that, when some group in a society becomes powerfulenough, it shapes policies to its own rather than social advantage.3

Perhaps the best illustrations of political theory come from the history ofsovereign state-building, which has been magnificently recounted by Finer(1997). Finer shows, for example, how the Russian czars, Ottoman sultans,and Tokugawa shoguns created polities in which they had absolute uncheckedpower through near complete control over the military, the aristocracy, the re-ligion, and the bureaucracy [see also Pipes (1974), Jones (1981), and Tilly(1990)]. These empires were short on property rights, long on government in-tervention, and (eventually) quite short on government efficiency as well; theyhad few laws or civil rights and relatively small governments. These qualities

1. Following Olson (1965), these theories pay a great deal of attention to free-rider problemsthat need to be overcome to produce any public goods, including institutions. This is where thecultural theory typically enters: ideology or beliefs help overcome free-riding.

2. Analytically we can analyze the political theories of institutions in terms of the control rightsof various agents (Grossman and Hart, 1986; Boycko, Shleifer, and Vishny, 1995, 1996).

3. Governments become massively redistributive when there are relatively few very powerfulgroups with different interests, not when there are many relatively weak groups each pushing inits own direction. This view is consistent with Becker’s (1983) notion that interactions of manyrelatively small lobbies lead to efficient outcomes and is inconsistent with Olson’s (1982) view thatincreased density of such lobbies reduces efficiency through political stalemate. Having lots ofweak articulated interests is better than having a few very strong ones.


of government were an immediate consequence of the intent of the politicalrulers to maintain complete control over their subjects.

Finer (1997) contrasts this oriental despotism with European absolutism,where the power of the monarch was at least partially checked by law, andwhere the Church (in Catholic countries) and the aristocracy to some extentrestricted autocratic control. These countries, as a consequence, had moresecure property rights, and greater political rights of the subjects, although thesovereigns continually tried to restrict these rights to enhance their revenues.Civil law developed in Western Europe as part of such restrained control bythe sovereigns over their subjects. Consistent with the point that governmentefficiency is a separate matter than intervention, some European countries, suchas Prussia, managed to create relatively efficient bureaucracies, while others,such as Italy and France, have created “patrimonial” bureaucracies that usedtheir powers to pursue the personal interests of the officials rather than those ofthe sovereign (Ertman 1997).

Finally, in contrast to European absolutism, British government was shapedby the victory of aristocracy over the crown, and resulted in a more limited gov-ernment, greater political freedoms, and a more efficient bureaucracy. Commonlaw was developed, in part, as a mechanism for protecting the subjects from thecrown. Perhaps surprisingly, the consent of the governed enabled the BritishParliament to raise considerably higher tax revenues for military spending thanthe French kings could ever raise (Brewer, 1988): the British government wasbigger though less interventionist.4 Whatever the nuances of these histories,the basic point that institutions and policies are shaped not by considerations ofefficiency but rather by the ability of the various players to extract rents seems tobe broadly confirmed by the narrative accounts of world history [see also Jones(1981), DeLong and Shleifer (1993), Ertman (1997), Kamen (1997), etc.].

In some cases, political and economic theories of institutions share similarpredictions. For example, it may serve the interest of tax-extracting sovereignsto impose some constraints on their own powers so as to “fatten” the goosebefore roasting it, or even to provide public goods such as justice and propertyrights protection to enhance tax revenues (North, 1981; Olson, 1993). In thosecases, even though the ultimate goal of a policy is redistribution toward thesovereign through enhanced tax collections, its immediate effect is to increaseefficiency. Frederick the Great’s reforms are a great example of this phenomenon(Johnson, 1975). Although kings are surely different from outright plunderers,the economic and political theories differ in that the former, in the first instance,do not accommodate purely rent-seeking policies. Unlike economic theories,political theories readily predict the existence of inefficient, interventionist, anddistortionary policies that are put in place not because they raise the social prod-uct but because they redistribute it. Such clearly redistributive policies renderpolitical and economic theories distinguishable at least in principle.

4. This contrasts with the very limited aristocratic government of Poland, where the baronsoccasionally could not agree to pay for armies needed to resist aggression, with the result that thegovernment was small and the country got even smaller (Ertman, 1997; Finer, 1997).


Finally, cultural theories state that some societies form beliefs and ideas thatare conducive to good government, while others do not (see Weber, 1958).Some of these beliefs and ideas are nonverifiable (e.g., beliefs in punishmentsare rewards after death), others verifiable and false (e.g., certain racists andanti-Semitic beliefs), and still others self-fulfilling (e.g., the belief that yourneighbors do not cooperate in any collective action and so you should noteither). When these beliefs are highly pervasive and persistent, they get to becalled “culture.”

Two recent instantly famous versions of such cultural theories are due toRobert Putnam (1993) and David Landes (1998). Putnam’s theory [see alsoColeman (1990) and Fukuyama (1995)] states that trust in strangers facilitatescollective action, which he views as essential for the provision of public goods.Putnam comments that in Italy the Catholic Church had adverse effects ontrust, because “vertical bonds of authority are more characteristic of the ItalianChurch than horizontal bonds of fellowship” (p. 107). Putnam compares avariety of social outcomes in high-trust northern Italy and low-trust southernItaly, and finds confirmation of his views. Knack and Keefer (1997) and LaPorta et al. (1997b) also find empirical support for the view that higher trust instrangers predicts better government performance, even across countries.

More recently, Landes (1998) argued that during the period of economictakeoff of Protestant countries, Catholic and Muslim countries in particularhave acquired cultures of intolerance, xenophobia, and closed-mindedness thatretarded their development. According to Landes, starting in the 15th cen-tury or even earlier, Catholic countries of southern Europe and Latin America,egged on by the Church, burned heretics, forbade learning and travel by theircitizens, censored books, and restricted the inflow of new ideas. In part, theCatholic Church felt threatened by other religions emerging from the ProtestantReformation, and in part it wanted to extend its influence. The consequencesof such intolerance were both the enormous increase in the power of churchand state as they dedicated substantial resources to keeping out new ideas, andthe inability of Catholic countries to learn from others. Landes believes thatthis intolerance was responsible for the decline of Spain, Portugal, and Italy,for poverty of Latin America, and for many other ills. Similarly, the declineof Muslim countries after the 13th century (that followed the golden age ofopenness and prosperity) is also explained by the newly found but long-lastingintolerance as a means of political and religious control.

Many cultural explanations of institutions and policies have a political el-ement to them, as Landes’s emphasis on the use of intolerance for politicalends makes clear. Thus the Spanish Inquisition might have been the supremeexample of Catholic intolerance that Landes takes it to be. But it was, in thefirst place, a political attempt by Ferdinand and Isabella to wrest control overreligion from Rome by organizing religious life around the courts of Inquisitionpaid for by the Crown (Kamen, 1997). Similarly, the Church throughout theCatholic world has fought the State to tax and regulate the citizenry (Barra-clough, 1972; Putnam, 1993; Finer, 1997; Mack Smith, 1997). It ultimatelylost, but not before making a significant imprint on the governments of these


countries.5 Interestingly, as Huntington (1991) explains, the Catholic Churchin the 1960s switched from being a powerful force against liberalism (and there-fore a source of poor culture, according to Landes) to a powerful force towarddemocratization, presumably again for the political reason of trying to maintainmembership. Perhaps in part as a consequence, most of the countries that havedemocratized in the last 30 years, including Portugal, Spain, Poland, Hungary,Philippines, Nicaragua, Argentina, Brazil, and Mexico, have been Catholic.Finally, one could argue that Tokugawa Japan—perhaps the most intolerantand xenophobic polity of them all—changed its policies in the Meiji Restora-tion because the cultural beliefs of the officials have become more “Western”(Beasley, 1972). But there is an obvious political explanation: the politicalinterests of the Tokugawa shoguns, namely controlling internal threats, werevery different from those of the Meiji reformers, namely addressing the externalthreat. In short, culture appears to be quite often shaped by politics.

2.3 Developing HypothesesOur goal is to look for exogenous variation in economic, political, and culturalcircumstances across countries that may account for the variation in governmentperformance. Finding such exogeneity is rather difficult. Economists looked atsuch variables as government consumption (Barro, 1991), democracy (Barro,1996a), corruption (Mauro, 1995), and institutional quality (Knack and Keefer,1995) as determinants of economic growth. More recently, Hall and Jones(1999) have examined institutional quality, size of government, openness totrade, and private ownership as determinants of productivity across countriesand made the brave argument that productivity is unlikely itself to influenceinstitutions. From our perspective, of course, the quality of government isendogenous; to understand what determines government performance, and todistinguish between theories, we need to look at the more fundamental, or atleast historically predetermined, variables.

From this perspective, economic theories of institutions are the hardest to test.The thrust of these theories is that economic development itself creates a demandfor good government, and hence the appropriate measure of demand is per capitaincome. Based on this logic, our test of economic theories is to consider percapita income as a potential determinant of government performance. But goodinstitutions themselves improve economic conditions. For example, we wouldexpect better protection of property, improved government efficiency, higherquality private goods, perhaps big but good government, and perhaps politicalfreedoms to enhance per capita income. We therefore have a relatively weaktest of economic theories and, in fact, the article focuses on other determinantsof government performance.

We use two strategies to identify the relevance of political theories of insti-tutions. The first measure of the State’s predisposition to major redistribution

5. DeToqueville (1858) discusses the motivation of French revolutionaries by noting that “tooverthrow the institutions of existing social order they must begin by destroying those of theChurch, on which they were modeled and from which, indeed, they derived” (p. 151).


is ethnic heterogeneity [see, e.g., Mauro (1995); Alesina, Baqir, and Easterly(1999); Easterly and Levine (1997)]. In ethnically heterogeneous societies, ithas been common for the groups that come to power to fashion governmentpolicies that expropriate (or kill) the ethnic losers, restrict their freedom ofopposition, and limit the production of public goods to prevent those outsidethe ruling group from also benefiting and getting stronger. Alesina, Baqir, andEasterly (1999) offer a theory in which disagreement over the nature of pre-ferred public goods leads ethnically heterogeneous societies to demand fewerof those goods, but there are many other—much more hostile—mechanismsthrough which heterogeneity can undermine government performance. Thepolitical theories predict that, as ethnic heterogeneity increases, governmentsbecome more interventionist and less efficient, and the quality of public goodsfalls, as does the size of government and political freedom.6

Our second strategy for evaluating political theories is to consider each coun-try’s legal origin. We divide national commercial legal traditions into commonlaw, French civil law, German civil law, Scandinavian law, and socialist law.These traditions were developed in England, France, Germany, Scandinavia,and the Soviet Union but then spread through the world through conquest,colonization, imitation, and voluntary adoption. The distinctions between theFrench, German, and Scandinavian families are relatively subtle (as we discussbelow), but the distinctions between socialist, civil, and common law traditionsare not.

To begin, socialist law is a clear manifestation of the State’s intent to createinstitutions to maintain its power and extract resources, without much regardfor protecting the economic interests or the liberties of the population. Thegoal of socialist law is to keep the Communist Party in power, not to protectproperty or freedom.

Civil law, particularly since the time of Codification in the 19th century, hasalso been largely an instrument of the State in expanding its power, thoughin a more constrained way than socialist law [see Elster, Offe, and Press(1997:39); Finer (1997:1564)]. It is not surprising that the principal legalcodes of the world were introduced by the two greatest State builders of the19th century: Napoleon and Bismarck. Civil law is largely legislature cre-ated and is focused on discovering a just solution to a dispute (often from thepoint of view of the State) rather than on following a just procedure that pro-tects individuals against the State (David and Brierley, 1978:331). Amusingly,Rene David—whose book can be fairly seen as a treatise on the superiorityof civil law over common law—is surprised at France’s weakness in the areaof public law that deals with restraints on public officials (David and Brierley,1978:76).7 A civil legal tradition, then, can be taken as a proxy for an intent

6. One can alternatively argue that ethnic heterogeneity is related to ethnic hatred, which iscultural rather than political. Often, though not always, ethnic hatred seems to have politicalantecedents.

7. An illustration is worth quoting in full: “Thus a taxpayer, even in the absence of any textuallyestablished right or some error committed in his case, can bargain with the tax authorities or obtain


to build institutions to further the power of the State, although not to the sameextent as in the socialist tradition.

The English common law tradition is entirely different in that its developmentstarting in the 17th century has been shaped by Parliament and the aristocracy atthe expense of the Crown, and hence it has reflected to a much greater extent theintent to limit the power of the sovereign (David and Brierley, 1978:303; Finer,1997:1347–1348). As a result of this influence, the judges who made commonlaw “put their emphasis on the private rights of individuals and especiallyon their property rights” (Finer, 1997:1348). There is also more emphasison restraining the government and on protecting the individual against thegovernment. A common law tradition, then, can be taken as a proxy for theintent to limit rather than strengthen the State.

In our earlier work (La Porta et al., 1997a, 1998) we considered legal tradi-tions in a narrower context of examining legal protection of investors and theeffect of such protection on capital markets. Here we use legal traditions ascruder proxies for the political orientation of governments. Most clearly, weexpect that countries with socialist laws have the most interventionist govern-ments, next come countries with civil laws, and finally common law countries.We would predict the same ordering for political freedom. In other dimen-sions of the quality of government, however, the relationships might be morecomplicated.

We expect that government efficiency is the lowest in socialist law countries,in part because the extreme power of the State corrupts the bureaucracies. Wealso expect that government efficiency should be high in common law, Scan-dinavian, and German civil law countries, despite the interventionist stance ofthe law in the latter two groups, largely because these countries have managedto build professional rather than patrimonial bureaucracies based on the armiesand professional civil servants rather than aristocrats and clerics (Ertman 1997;Finer 1997). We expect the French civil law countries to be intermediate ingovernment efficiency because the bureaucracy was built to be powerful andlargely unconstrained. Having made these conjectures, we note that our theo-retical and historical priors in this dimension of government performance arerelatively weak.

The predicted effects of the legal systems on public good provision andgovernment spending are not entirely straightforward either. We expect socialistlaw countries, in part because of their commitment to equality and in partbecause of their militarism, to do well on education and infant mortality, thoughnot necessarily on infrastructure. With respect to public good provision and thesize of government, we have no strong priors: civil law countries may have agreater interest in state expansion but a lower ability to tax than the commonlaw countries. A more interventionist state is not necessarily a larger one.

a release in view of his special circumstances. According to the French Ministere de l’economieet des finances, about 200,000 taxpayers each year obtain some reduction in or release from taxesupon an appeal to thebienveillanceof the administration.Le Monde, August 9, 1968” (David andBrierley, 1978:77).


One possible concern with using legal systems as independent variables isthat they are, to some extent, endogenous—a symptom of the relative powerof the State and its subjects rather than the cause. Thus common law acquiredits rules because the Crown was weak in the first place, and not the other wayaround. But this concern, while legitimate, makes legal systems particularlyappropriate independent variables for testing political theories of institutions.Suppose that legal systems, which were acquired centuries ago as part of thepolitical process (both voluntarily and not), are found to influence governmentperformance today. This would mean that the historically determined politicalallocation of power, as reflected in the law, shapes government performancetoday, precisely as the political theory predicts. Despite their historical endo-geneity, legal variables serve our empirical purpose extremely well.

Finally, we come to the cultural theories. Following Weber (1958), Put-nam (1993), and Landes (1998), our proxy for the dimension of culture thatinfluences government performance is religion—more precisely, the percent-age of population in each country belonging to different religious affiliations.In an earlier article (La Porta et al., 1997b) we provided some evidence thatcountries whose populations belong primarily to what we called “hierarchicalreligions”—Catholicism, Islam, and Greek Orthodox—exhibit inferior gov-ernment performance to that of largely Protestant countries. In this articlewe separate out the three most widespread religions—Muslim, Catholic, andProtestant—from all others.8 We also focus on Muslim and Catholic religionsbecause Landes (1998) singles them out as particularly detrimental to develop-ment.

To begin, we note that cultural theories typically do not focus on government.Weber (1958) is interested in entrepreneurship, Putnam (1993) focuses on publicgood provision, and Landes (1998) is concerned with the flow of people, goods,and ideas between countries. Nonetheless, we try to develop some hypothesesfor the effects of religion on governments.

It is probably fair to say that both Muslim and Catholic countries would beviewed by the adherents of cultural theories as being more interventionist—in part because the doctrines of these religions are more interventionist (theylike to tell people what to do) than Protestantism, and in part because thesereligions grew to support State power. Cultural theories would probably alsopredict that governments in predominantly Catholic and Muslim countries areless efficient partly as a consequence of excessive power, and partly becausebureaucracies in these countries, particularly the Catholic ones, have developedfrom religious ranks (clerk comes from cleric), and hence were not as dependenton the sovereign. Cultural theories would definitely predict inferior provision ofpublic goods in Muslim and Catholic countries, although Putnam’s story here isa bit political: religion competes with, and undermines, the State in the provision

8. We do not focus on the Orthodox religion here because it is not as widespread as the otherthree and because many people in (at least formerly) Orthodox, but later on socialist, countriesreport to be nonreligious.


of public goods.9 We would not even conjecture what these theories predict forgovernment consumption. Finally, these theories, particularly Landes (1998),would surely predict that Muslim and Catholic countries have fewer civil rights:the State-supported intolerance in these countries requires a curtailment offreedom to be carried out. (Remember, however, the switch by the CatholicChurch after Vatican II in the 1960s.)

3. DataOur analysis is based on a dataset of measures of government performance andtheir potential determinants in (up to) 152 countries. Since we are combininga large number of datasets, we have different numbers of observations fordifferent variables, with some regressions covering as few as 47 countries. Thedata typically also come from different years, although most of the data are fromthe 1990s. The definitions and sources for all the variables used in this articleare summarized in Table 1; Appendices A and B present summary statisticsand the data on the independent variables.

To gain robustness, we try to use as our measures of government perfor-mance both objective and survey measures from different data sources. This isparticularly important for subjective assessments of government performance,sincewithin the same surveyresponses to different questions may simply reflectsome general underlying sentiment toward a country. When different surveysuse different respondents, this risk is reduced.

We measure government intervention by an index of property rights protec-tion, an index of the quality of business regulation, and the top marginal tax rate.We measure government efficiency by survey scores on corruption, bureaucraticdelays, and tax compliance. We also include in this category a measure of rel-ative wages of government officials to see if higher wages are associated withmore efficient government. We measure the output of public goods by infantmortality, school attainment, illiteracy, and an index of infrastructure quality.(With illiteracy and infant mortality, we depart from the convention that highervalues of the measure refer to better performance.) We measure the size of thepublic sector by government transfers and subsidies, government consumption,an index of the size of the state enterprise sector (higher value means smaller),and a measure of the relative size of public sector employment. Finally, we useindices of democracy and of political rights in our democracy category.

Table 2 presents the correlations between the dependent variables, whichreveal a number of fascinating patterns. The correlations between measures ofgovernment performance within the same category are generally high. In theintervention category, there is a positive correlation between property rightsprotection and the business regulation index, but the top tax rate is not signif-icantly related to these two measures of government intervention. This result

9. Another version of the cultural story is that religions that require their followers to read thesacred texts (such as Protestantism) encourage literacy, whereas religions that rely on the auditoryabsorption of information (such as Catholicism) discourage literacy.


Table 1. Description of the Variables

Variable Name Description and Source Number ofObservations

Interference with the private sector:Property A rating of property rights in each country 149rights (on a scale from 1 to 5). The more protectionindex private property receives, the higher the score.

The score is based, broadly, on the degree of legalprotection of private property, the extent to whichthe government protects and enforces laws thatprotect private property, the probability thatthe government will expropriate private property,and the country’s legal protection to privateproperty. Source: Holmes, Johnson, andKirkpatrick, 1997.

Business A rating of regulation policies related to 149Regulation opening a business and keeping open aindex business (on a scale from 1 to 5). Higher

score means that regulations are straight-forwardand applied uniformly to all businesses and thatregulations are less of a burden to business. Source:Holmes, Johnson, and Kirkpatrick, 1997.

Top tax rate Top marginal tax rate for each country 82in 1994. Source: Gwartney, Lawson, andBlock, 1996.

Efficiency:Corruption Corruption in government index. Low 126

ratings indicate “high government officialsare likely to demand special payments” and“illegal payments are generally expected thoughtlower levels of government” in the form of“bribes connected with import and exportlicenses, exchange controls, tax assessment,policy protection, or loans.” Scale from 0to 10. Average of the months of April andOctober in the monthly index between 1982and 1995. Source: Political RiskServices, various years.

Bureaucratic An indicator of bureaucratic delays 60delays (red tape). Low ratings indicate lower

levels of red tape in the bureaucracy of thecountry. Scale from 0 to 10. The index ispublished three times per year. The data isthe average of the years between 1972 and1995. Source: Business Environmental RiskIntelligence’s (BERI) Operation Risk Index.

Tax compliance Assessment of the level of tax 49compliance. Scale from 0 to 6, where higherscores indicate higher compliance. Data isfor 1995. Source: World Economic Forum, 1996.

Continued


Table 1. Continued

Avg. government The ratio of average wages of 63wages/GDP per central government to per capitacapita GDP in each country. Certain non-wage

benefits are not included in the estimate ofthe average central government wage. Source:Schiavo-Campo, de Tommaso and Mukherjee, 1997.

Output of public goods:Log of infant Logarithm of the number of 196mortality deaths of infants under one year

of age per one thousand live births forthe years 1970–1995. Source: WorldBank, World Development Indicators1997 (WDI).

Log of school Log of schooling taken over 106attainment five year periods (1960–65,

1970–75, and 1980–85). Each value isobtained as the logarithm of (1 + averageyears of school attainment during therespective period). Source: Barroand Lee, 1994.

Illiteracy rate Average of adult illiteracy 128rate for the years 1990–1995. Adultilliteracy rate is the proportion of adultsaged 15 and above who cannot, withunderstanding, read and write a short,simple statement on their everyday life.1990–1995. Scale 0 to 100. Source: WDI.

Infrastructure Assessment of the “facilities 60quality for and ease of communication between

headquarters and the operation, and within thecountry,” as well as the quality of thetransportation. Average data for the years1972 to 1995. Scale from 0 to 10 with higherscores for superior quality. Source:BERI’s Operation Risk Index.

Size of public sector:Transfers and Total government transfers and 90subsidies/GDP subsidies as a percentage of GDP

(scale from 0 to 100). Average for theyears 1975–1995. Source: Gwartney,Lawson, and Block, 1996 (with datafrom the World Bank and InternationalMonetary Fund).

Continued


Table 1. Continued

Government Government consumption expenditures 104consumption/ as a percentage of GDP (scale fromGDP 0 to 100). Average for the years 1975–1995.

Government consumption expenditures “includeall spending on goods and services purchasedby the government—things like nationaldefense, road maintenance, wages and salaries,office space, and government-owned vehicles.Since it is obtained from the nationalincome accounts, it includes all levelsof government spending. It does not includedirect transfers and subsidies, since thesedo not enter into the national income accounts.”Source: Gwartney, Lawson, and Block, 1996(with data from the World Bank and InternationalMonetary Fund).

SOEs in the Index of State-Owned Enterprises 104economy as a share of the economy (scale from

0 to 10). Higher scores include countries withless government-owned enterprises which areestimated to produce less of the country’s output.As the estimated size and breadth of the SOE sectorincreases, countries are assigned lower ratings.Average of the score for the years 1975–1995.Source: Gwartney, Lawson, andBlock, 1996.

Public sector Average of the ratio of public sector employment 124employment/total in general government to total populationpopulation for the years 1976–1996. General government

employment includes employment in “all governmentdepartment offices, organizations and other bodieswhich are agencies or instruments of the centralor local authorities whether accounted for orfinanced in, ordinary or extraordinary budgets orextra-budgetary funds. They are not solely engaged inadministration but also in defense and public order, inthe promotion of economic growth and in the provision ofeducation, health and cultural and social services.” Source:Schiavo-Campo, de Tommaso, and Mukherjee, 1997.

Political freedom:Democracy index Average of democracy score for the period 161

1970–1994. Scale from 0 to 10, with lower valuesindicating a less democratic environment. Source:Jaggers and Gurr, 1996.

Political rights Index of political rights. Higher ratings 209index indicate countries that come closer “to the ideals

suggested by the checklist questions of: (1) free and fairelections; (2) those elected rule; (3) there are competitiveparties or other competitive political groupings; (4)the opposition has an important role and power; and(5) the entities have self-determination or an extremelyhigh degree of autonomy.” Source: Freedom House,1996.

Continued


Table 1. Continued

Determinants:Ethnolinguistic Average value of five different indices 161fractionalization of ethonolinguistic fractionalization.

Its value ranges from 0 to 1. The five component indicesare: (1) index of ethnolinguistic fractionalization in 1960,which measures the probability that two randomly selectedpeople from a given country will not belong to the sameethnolinguistic group (the index is based on the numberand size of population groups as distinguished by theirethnic and linguistic status); (2) probability of tworandomly selected individuals speaking differentlanguages; (3) probability of two randomly selectedindividuals do not speak the same language; (4)percent of the population not speaking the officiallanguage; and (5) percent of the population notspeaking the most widely used language. Sources:Easterly and Levine, 1997. The sources of thecomponents of the average index are (1) AtlasNarodov Mira, 1964; (2) Muller, 1964; (3)Roberts, 1962; (4) and (5) Gunnemark, 1991.

Legal origin Identifies the legal origin of the 212Company Law or Commercial Code of each country.There are five possible origins: (1) English CommonLaw; (2) French Commercial Code; (3) GermanCommercial Code; (4) Scandinavian CommercialCode; and (5) Socialist/Communist laws. Source:La Porta et al., 1998, extended using“Foreign Laws: Current Sources of BasicLegislation in Jurisdictions of theWorld,” 1989; and CIA WorldFactbook 1996.

Religion Identifies the percentage of the population 209of each country that belonged to the three mostwidely spread religions in the world in 1980. Forcountries of recent formation, the data is availablefor 1990–1995. The numbers are in percent (scale from0 to 100). The three religions identified here are:(1) Roman Catholic; (2) Protestant; and (3) Muslim.The residual is called “other religions”. Sources:Barrett, 1982, Worldmark Encyclopediaof Nations 1995, Statistical Abstractof the World 1995, United Nations, 1995,CIA 1996.

Economic Development:Latitude The absolute value of the latitude of the 209

country, scaled to take values between 0 and 1.Source: CIA 1996.

Log GNP per Logarithm of GNP per capita expressed in 186capita current U.S. dollars for the period 1970–1995.

Source: WDI.


gets back to the earlier point: high taxes are not necessarily a sign of an inferiorgovernment.

In the government efficiency category, less corrupt countries also have fewerbureaucratic delays and higher tax compliance. Tax compliance and the scoreon bureaucratic delays are also positively correlated. These correlations sup-port the view that corruption is another side of bureaucratic discretion, sincedelays create the opportunities to take bribes. Finally, corruption is negativelycorrelated with the relative wages of government officials. Contrary to the viewthat higher pay for bureaucrats is a remedy for corruption, the raw correlationsuggests just the opposite. It is likely instead that in countries where bureaucratshave much power, they collect both higher wages and significant bribes. Con-sistent with this view as well, countries where the government is more efficient(including less corrupt) are on average also less interventionist.

The measures of public good output are highly correlated with each other.Low infant mortality, significant school attainment, low illiteracy, and high-quality infrastructure typically come together. Countries with good publicgoods are also the ones with efficient government, low (!) relative governmentwages, and less intervention (except for the high top tax rate).

With the exception of the SOE index, the various measures of the size ofgovernment are strongly correlated with each other. Countries with more gov-ernment consumption, transfers, and labor are less corrupt; they have fewerbureaucratic delays and better provision of public goods, but also higher taxrates. Figures 1 and 2 present the scatter plots of the corruption index and infantmortality, respectively, against government transfers and subsidies as a shareof GDP. The scatter plots, and the correlations more generally, show clearlythat bigger governments, while taxing more, look better on just about everymeasure of performance. This result, that the larger governments tend to be thehigher quality ones, is one of our key findings. It does not imply, of course,that it is often desirable to expand a government of a given quality.10

The measures of democracy and political rights are highly correlated witheach other. Freer governments are larger, more efficient, intervene less, andprovide better public goods.

The correlations between the independent variables are presented in Table 3,and they too deliver interesting findings. We have three broad factors thatmay be related to government performance: ethnolinguistic fractionalization[measured, following Easterly and Levine (1997), as the average of severalmeasures of ethnic diversity], the origin of commercial laws, and the religiouscomposition of the population (the percentage of the population in the threemost widespread religions). We also include latitude and (the log of) per capitaincome as control variables. We discussed per capita income already. Weinclude (the scaled absolute value of) latitude because temperate zones havemore productive agriculture and healthier climates, which has enabled them

10. Lindbeck (1997), for example, suggests that even a reasonably efficient government, such asthat of postwar Sweden, can become too imposing to sustain economic growth.

240The

JournalofLaw,E

conomics,&

Organization,V15

N1

Table 2. Correlations of Dependent Variables

Interference with private sector Efficiency Output of public goods Size of public sector Politicalfreedom

Property Business Top tax Corrupt. Bureau. Tax Gov. L. infant L. school Illiteracy Infrastr. Transf. Gov. SOEs Gov. Democracy

rights regulation rate delays compl. wages / mortality attainm. rate index & Subs. / consump / index labor / Index

index index GNP pc. GDP GDP population

Business .7382a

regulation

Top tax rate .1190 .0752

Corruption .5035a .4066a .2613

Bureaucratic .7100a .6938a .2789 .8550a

delays

Tax .6628a .5640a .0059 .5353b .6552a

compliance

Gov. wages −.0277 .0022 −.2862 −.5039c −.3598 .0013

/GNP percap.

Log infant −.5860a −.5704a −.2385 −.7192a −.8075a −.5516b .4585b

mortality

Log school .6553a .5684a .1888 .6912a .6783a .5080 −.4874 −.8674a

attainment

Illiteracy rate −.4211a −.4392a .3115 −.2250 −.4342 −.1162 .6113 .7811a −.8694a

Continued

TheQ

ualityofG

overnment

241

Table 2. Continued

Interference with private sector Efficiency Output of public goods Size of public sector Politicalfreedom

Property Business Top tax Corrupt. Bureau. Tax Gov. L. infant L. school Illiteracy Infrastr. Transf. Gov. SOEs Gov. Democracy

rights regulation rate delays compl. wages / mortality attainm. rate index & Subs. / consump / index labor / Index

index index GNP pc. GDP GDP population

Infrastructure .7410a .6836a .4035 .8142a .9298a .6229a −.3429 −.7907a .6793a −.3759

index

Transfers & .4831a .3257 .4183b .6512a .4858c .1207 −.5229 −.7147a .6514a −.3038 .5545a

subs. / GDP

G. consumpt. .1788 .1884 .3324 .4604a .4662 .2402 −.1852 −.3300 .2734 .0012 .4686c .4005b

/GDP

SOEs index .2431 .2950 −.1683 .1550 .5379a .6008a .1657 −.1794 .1446 −.1705 .4735c −.2976 −.1434

Gov. labor / .3811b .3157 .2692 .6077a .4703 .3047 −.4202 .7064a .6833a −.5207a .4969b .7222a .5235a .0362

population

Democracy .5921a .4735a .1209 .6395a .6653a .3120 −.2132 −.7033a .6606a −.4545a .7381a .4727a .3178 .2386 .5141a

index

Political .6022a .4600a .0338 .5388a .6251a .2165 −.1169 −.5673a .6708a −.4171a .6681a .5954a .2465 .1520 .3702a .7394a

rights index

aSignificant at 1% level.bSignificant at 5% level.cSignificant at 10% level.


Figure 1. The size of government and corruption.

Figure 2. The size of government and infant mortality.


Tabl

e3.

Cor

rela

tions

ofIn

depe

nden

tVar

iabl

es

Eth

nolin

guis

ticE

nglis

hS

ocia

list

Fren

chG

erm

anS

cand

inav

ian

Pro

test

ant

Cat

holic

Mus

limO

ther

Latit

ude

fract

iona

lizat

ion

lega

lorig

inle

galo

rigin

lega

lorig

inle

galo

rigin

lega

lorig

inre

ligio

ns

Eng

lish

lega

lorig

in.1

568

Soc

ialis

tleg

alor

igin

−.17

41−.

3223

a

Fren

chle

galo

rigin

.053

8−.

6345

a−.

3894

a

Ger

man

lega

lorig

in−.

1491

−.13

39−.

0822

−.16

18

Sca

ndin

avia

nle

galo

rigin

−.15

66−.

1126

−.06

91−.

1361

−.02

87

Pro

test

ant

−.05

76.2

446b

−.20

62−.

2754

a.0

238

.516

5a

Cat

hlol

ic−.

1882

−.23

16−.

1984

.401

3a.0

328

−.13

86−.

1569

Mus

lim.1

912

−.07

25−.

0483

.177

9−.

1152

−.09

75−.

3473

a−.

4885

a

Oth

erre

ligio

ns.0

615

.134

8.4

504a

−.46

01a

.074

5−.

1104

−.16

83−.

4746

a−.

3021

a

Latit

ude

−.44

58a

−.27

58a

.442

6a−.

2429

.174

5.3

382a

.187

2−.

1389−.

0664

.116

0

Log

GN

Ppe

rcap

ita−.

4427

a−.

0096

−.01

93−.

1651

−.26

87b

.281

7b.2

614b

.121

6−.

1875

−.11

02.5

314a

a Sig

nific

anta

t1%

leve

l.b

Sig

nific

anta

t5%

leve

l.c

Sig

nific

anta

t10%

leve

l.


to develop their economies and possibly their institutions as well (Landes,1998).

Ethnolinguistic fractionalization (EF) is unrelated to any of our religious orlegal origin variables, but is significantly negatively correlated with latitudeand per capita income. It is noteworthy that EF captures a different aspect ofsociety than religion and law.

The correlations between the legal and religious variables are predictable, butimportant. First, there are significant negative correlations between the percent-ages of Protestants and Muslims, Catholics and Muslims, Catholics and otherreligions, and Muslims and other religions across countries. Second, Catholiccountries typically have French legal origin; Protestant countries typically havean English or Scandinavian legal origin, and are less likely to have Frenchlegal origin; other religions are more likely to have a socialist legal origin, pre-sumably because of the significant presence of Orthodox religions in socialistcountries. Third, Scandinavian and German legal origin countries, as well asProtestant countries, are richer. Fourth, ethnolinguistically fractionalized andcommon law countries tend to be closer to the equator, whereas socialist andScandinavian legal origin countries tend to be further away from it. Of course,Scandinavia and Germany have not had many colonies, and hence their legaltraditions are restricted to wealthy European and East Asian countries.

4. Regression ResultsIn this section we present regressions of determinants of government perfor-mance. We present each regression both with and without the logarithm of percapita income and latitude controls.11 The argument for including per capita in-come (or for that matter, latitude) is that, on the economic theory of institutions,development improves government performance.12 On the other hand, goodpolicies themselves enhance per capita income, and so a regression with trulyexogenous independent variables should not include income. Including incomein the regressions together with other determinants of performance would thenspuriously reduce our estimates of the impact of these determinants on the qual-ity of government. For example, if EF undermines government performance,and poor performance reduces per capita income, then including income in theregression of government performance on EF would reduce the estimated effectof the latter. We estimate the regressions both ways, and try to understand howthe results depend on the specification.

We present the results in Tables 4–6. Since religious affiliations and legal

11. The logarithm of per capita income and latitude are strongly correlated with each other. Wealso ran the regressions including them one at a time. Each is nearly always significant whenincluded alone. Countries that are further from the equator, or richer, have better governmentperformance. We include them together because the correlation between them is not perfect.

12. Hall and Jones (1999) make the argument that per capita income (or productivity) shouldnot have a direct effect on institutional quality, based on their impression that, in the United States,institutions were better in 1790 than in 1990. The economic theory of institutions, which Hall andJones appear to endorse, argues that causation goes precisely in the opposite direction.


origins are correlated with each other, and EF appears to be uncorrelated witheither, we include legal origin and EF together as independent variables inTable 4 and religious affiliation and EF in Table 5. In Table 6 we include EF,legal origin, and religious affiliation.

Looking at Table 4 (or Table 5) we note that the logarithm of per capita income(and latitude) generally has a strong positive effect on government performance.Richer countries are less interventionist in that they protect property rights andregulate better, although they also have higher marginal tax rates. Richer coun-tries also have more efficient governments, better provision of public goods,and—as Wagner law suggests—a larger public sector (except a smaller stateenterprise sector).

The results on per capita income mean either that there is some merit tothe economic theories of institutions, or that good governments promote de-velopment, or both. Consistent with the importance of the correlation betweengovernment performance and per capita income, the explanatory power of theregressions generally rises sharply when per capita income is included in theregressions. Having established the importance of this correlation, we can nowturn to the central question: Do historical factors, as suggested by the politicaland cultural theories, help explain the variation in government performanceacross countries? As we show below, the answer is yes.

4.1 Ethnolinguistic FractionalizationWe discuss EF results based on Table 4, which only includes variables sug-gested by the political theories of institutions. The results on EF in Table 5are similar. In the specifications excluding latitude and per capita income, EFhas a very consistent adverse effect on government performance. Higher frac-tionalization is associated with more interventionism (worse property rightsand regulation), lower government efficiency (more corruption, longer delays,lower tax compliance), inferior provision of public goods (higher infant mortal-ity and illiteracy, lower school attainment and infrastructure quality), smallergovernment (transfers, consumption, and public employment), though morestate enterprises, and finally less political freedom. The adverse effects of EFon government performance are broadly consistent with the argument that EFcaptures the predisposition of ethnic groups in power to redistribute.

The negative effect of EF on government performance generally becomesinsignificant once we control for per capita income and latitude. (Recall thatEF is itself negatively correlated with per capita income.) Controlling for howpoor they are, ethnolinguistically fractionalized countries do not have espe-cially bad governments. One exception to this finding is public good provision,which is inferior in divided countries even controlling for their poverty. An-other exception is the prevalence of state ownership of firms, which is higherin divided countries even controlling for per capita income. The latter result isparticularly noteworthy because state-owned enterprises are such an importantmechanism of political redistribution. The effect of per capita income controlmay mean that EF adversely affects government performance, and bad perfor-mance in turn reduces per capita income, as the standard version of the political


Tabl

e4.

Gov

ernm

entP

erfo

rman

cean

dLe

galO

rigin

Dep

ende

ntVa

riabl

esIn

depe

nden

tVar

iabl

es

Eth

nolin

guis

ticS

ocia

list

Fren

chG

erm

anS

cand

inav

ian

Latit

ude

Log

GN

PIn

terc

ept

Adj

.R

2

fract

iona

lizat

ion

lega

lorig

inle

galo

rigin

lega

lorig

inle

galo

rigin

perc

apita

[N]

Inte

rfere

nce

with

the

priv

ate

sect

or

Pro

perty

right

sin

dex

−0.8

259b

−1.3

861a

−0.7

037a

1.08

39a

0.87

94a

——

3.98

13a

0.31

64(0

.299

5)(0

.380

0)(0

.200

5)(0

.220

6)(0

.285

3)(0

.234

6)[1

24]

0.33

17−1

.113

9a−0

.559

2a0.

0684

−0.5

310b

1.63

82a

0.41

72a

0.19

070.

6311

(0.2

630)

(0.2

618)

(0.1

455)

(0.2

481)

(0.2

619)

(0.4

957)

(0.0

720)

(0.5

028)

[124

]

Bus

ines

sre

gula

tion

inde

x−1

.099

5a−1

.050

8a−0

.466

8b−0

.090

7−0

.096

6—

—3.

3774

a0.

1974

(0.2

747)

(0.2

988)

(0.1

860)

(0.2

685)

(0.2

680)

(0.2

216)

[124

]

−0.2

452

−0.6

104b

−0.3

457b

−0.8

799a

−0.9

913a

0.17

760.

4382

a−0

.104

90.

5216

(0.2

483)

(0.2

365)

(0.1

329)

(0.2

646)

(0.2

471)

(0.5

372)

(0.0

767)

(0.5

005)

[124

]

Top

mar

gina

ltax

rate

in4.

8702

13.1

457b

2.13

2710

.819

019

.645

6a—

—36

.153

8a0.

1460

1994

(5.4

254)

(5.1

124)

(3.0

166)

(5.6

843)

(5.2

545)

(3.0

844)

[79]

17.0

138b

11.5

953c

4.48

686.

6684

10.4

847c

20.8

175b

2.39

567.

4816

0.27

58(6

.543

9)(6

.188

4)(2

.896

9)(6

.086

7)(5

.897

6)(9

.287

5)(1

.675

4)(1

3.21

7)[7

9]

Effic

ienc

y

Cor

rupt

ion

−2.1

657a

−0.0

716

−0.7

552

1.65

25c

3.55

06a

——

6.60

85a

0.29

83(0

.762

2)(0

.672

9)(0

.512

5)(0

.893

2)(0

.587

9)(0

.630

6)[1

14]

Con

tinue

d


Tabl

e4.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticS

ocia

list

Fren

chG

erm

anS

cand

inav

ian

Latit

ude

Log

GN

PIn

terc

ept

Adj

.R

2

fract

iona

lizat

ion

lega

lorig

inle

galo

rigin

lega

lorig

inle

galo

rigin

perc

apita

[N]

0.64

660.

2337

−0.4

105

0.00

910.

7869

c4.

0864

a0.

7953

a−1

.248

50.

5764

(0.8

108)

(0.6

066)

(0.3

873)

(0.5

378)

(0.4

840)

(1.3

598)

(0.1

910)

(1.4

530)

[114

]

Bur

eauc

ratic

dela

ys−1

.977

4a−2

.127

2a−1

.494

2a0.

5035

0.36

17—

—6.

1036

a0.

5027

(0.6

289)

(0.6

034)

(0.3

956)

(0.5

862)

(0.4

016)

(0.3

861)

[54]

0.18

33−0

.489

8−0

.847

8a0.

1754

−0.0

665

−0.1

704

0.76

75a−0

.837

60.

7435

(0.6

424)

(0.5

783)

(0.2

774)

(0.3

257)

(0.2

724)

(0.9

509)

(0.1

722)

(1.3

409)

[54]

Tax

com

plia

nce

−1.3

688b

−2.0

663a

−1.6

107a

−0.5

537

−0.9

029a

——

4.44

35a

0.49

95(0

.601

4)(0

.290

7)(0

.256

6)(0

.335

9)(0

.298

7)(0

.235

3)[4

8]

−0.7

822

−1.3

561b

−1.3

226a

−0.6

174b

−0.8

640b

−0.7

798

0.34

69b

1.57

820.

5718

(0.6

782)

(0.5

349)

(0.2

738)

(0.2

744)

(0.3

392)

(0.9

042)

(0.1

708)

(1.4

022)

[48]

Avg

.go

vern

men

twag

es/

0.49

62−0

.550

3c1.

0939

a−0

.359

5−0

.470

7c—

—1.

5625

a0.

4272

GN

Ppe

rcap

ita(0

.900

3)(0

.284

4)(0

.288

1)(0

.226

7)(0

.255

4)(0

.269

7)[4

7]

0.16

54−1

.691

3a0.

5171

0.09

39−0

.452

61.

9247

b−0

.642

5a6.

4064

a0.

6041

(0.6

898)

(0.4

749)

(0.3

128)

(0.3

640)

(0.3

705)

(0.8

489)

(0.1

502)

(1.1

449)

[47]

Out

puto

fpub

licgo

ods

Log

ofin

fant

mor

talit

y1.

4426

a0.

4598

c0.

3816

a−0

.852

1a−1

.247

7a—

—3.

2093

a0.

4299

(0.1

816)

(0.2

509)

(0.1

313)

(0.2

688)

(0.1

399)

(0.1

393)

[151

]

Con

tinue

d


Tabl

e4.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticS

ocia

list

Fren

chG

erm

anS

cand

inav

ian

Latit

ude

Log

GN

PIn

terc

ept

Adj

.R

2

fract

iona

lizat

ion

lega

lorig

inle

galo

rigin

lega

lorig

inle

galo

rigin

perc

apita

[N]

0.44

52a

−0.1

008

0.29

04a

0.05

06−0

.232

5b−0

.145

1−0

.523

3a7.

3733

a0.

8385

(0.1

247)

(0.1

630)

(0.0

726)

(0.1

336)

(0.1

153)

(0.2

973)

(0.0

401)

(0.2

769)

[151

]

Log

ofsc

hool

atta

inm

ent

−0.9

514a

−0.4

098a−0

.276

3a0.

1962

0.39

62a

——

1.83

09a

0.40

04(0

.159

6)(0

.113

8)(0

.105

7)(0

.146

6)(0

.114

1)(0

.113

6)[1

02]

−0.2

384

0.54

94a−0

.188

3a−0

.231

7a−0

.087

6−0

.305

40.

3479

a−0

.860

4a0.

7556

(0.1

185)

(0.0

831)

(0.0

686)

(0.0

844)

(0.0

977)

(0.2

547)

(0.0

352)

(0.2

514)

[102

]

Illite

racy

rate

32.0

410a

9.91

418.

1702

b−1

1.55

6a—

——

14.4

063

0.21

54(6

.027

4)(8

.298

3)(4

.174

4)(4

.292

1)(4

.292

1)[1

16]

16.4

024a

−12.

947

5.10

94c

−7.1

497b

—28

.496

7b−1

4.28

9a11

3.08

6a0.

5945

(5.0

588)

(8.7

744)

(2.9

942)

(3.2

073)

(11.

410)

(1.7

650)

(12.

882)

[116

]

Infra

stru

ctur

equ

ality

inde

x−2

.472

2a−3

.553

4a−1

.713

9a0.

8913

0.60

43—

—7.

2514

a0.

5314

(0.6

830)

(0.9

442)

(0.4

666)

(0.7

314)

(0.4

535)

(0.4

666)

[54]

0.73

78−1

.534

5c−0

.772

6a0.

4386

−0.3

074

1.34

200.

9478

a2.

0253

0.82

40(0

.558

1)(0

.802

6)(0

.278

7)(0

.388

2)(0

.299

4)(0

.902

2)(0

.177

6)(1

.352

5)[5

4]

Size

ofpu

blic

sect

or

Tran

sfer

san

dsu

bsid

ies

as%−1

1.06

9a9.

5935

a−1

.740

80.

7947

8.43

80a

——

12.3

694a

0.41

35of

GD

P(1

.943

3)(2

.815

0)(1

.408

6)(3

.346

2)(3

.062

6)(1

.584

7)[8

8]

Con

tinue

d


Tabl

e4.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticS

ocia

list

Fren

chG

erm

anS

cand

inav

ian

Latit

ude

Log

GN

PIn

terc

ept

Adj

.R

2

fract

iona

lizat

ion

lega

lorig

inle

galo

rigin

lega

lorig

inle

galo

rigin

perc

apita

[N]

−1.0

853

6.79

89b

0.52

68−3

.727

1−1

.623

022

.218

3a1.

8792

a−1

1.53

8a0.

7218

(1.7

668)

(2.7

920)

(1.0

485)

(2.3

284)

(3.3

284)

(3.9

537)

(0.5

528)

(4.2

783)

[88]

Gov

ernm

entc

onsu

mpt

ion

as−2

.034

4−5

.735

0a−1

.678

8−1

.549

95.

9173

a—

—16

.340

2a0.

1818

%of

GD

P(1

.462

0)(1

.345

9)(1

.119

8)(1

.893

6)(1

.987

4)(1

.228

5)[1

00]

0.66

17−6

.769

9a−1

.205

2−3

.304

9c2.

6416

5.91

78c

0.65

559.

0833

a0.

2594

(1.5

967)

(1.3

787)

(1.0

411)

(1.9

298)

(2.2

078)

(3.2

642)

(0.5

206)

(3.4

203)

[100

]

SO

Es

inth

eec

onom

yin

dex−1

.765

3b−4

.963

5a−0

.120

90.

5434

−1.1

847

——

5.31

44a

0.22

13(0

.704

2)(0

.474

6)(0

.477

4)(1

.026

2)(0

.760

3)(0

.503

1)[1

00]

−1.4

844b

−4.4

589a

−0.0

683

0.12

12−1

.210

5−2

.180

00.

4492

b2.

5190

c0.

2575

(0.7

489)

(0.5

099)

(0.4

662)

(1.0

293)

(0.8

639)

(1.7

007)

(0.2

102)

(1.3

091)

[100

]

Pub

licse

ctor

empl

oym

ent/

−3.4

957a

−0.6

837

−1.1

089b

−0.5

941

8.86

44a

——

5.23

41a

0.58

77to

talp

opul

atio

n(0

.623

2)(0

.848

1)(0

.476

2)(0

.999

8)(1

.173

3)(0

.546

5)[1

01]

−0.9

478c

0.62

69−0

.672

3a−2

.596

6a6.

6636

a0.

1170

1.24

29a

−4.7

012a

0.76

44(0

.561

8)(0

.743

9)(0

.328

3)(0

.922

6)(1

.211

2)(1

.843

5)(0

.242

1)(1

.485

7)[1

01]

Polit

ical

freed

om

Dem

ocra

cyin

dex

−4.1

753a

−5.4

741a−2

.488

9a0.

8801

3.40

16a

——

6.90

52a

0.32

17(1

.076

9)(0

.794

2)(0

.745

3)(1

.763

9)(0

.801

9)(0

.851

0)[1

25]

Con

tinue

d


Tabl

e4.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticS

ocia

list

Fren

chG

erm

anS

cand

inav

ian

Latit

ude

Log

GN

PIn

terc

ept

Adj

.R

2

fract

iona

lizat

ion

lega

lorig

inle

galo

rigin

lega

lorig

inle

galo

rigin

perc

apita

[N]

−0.4

720

−3.8

954a

−2.0

485a

−2.5

033b

−0.7

896

1.63

261.

8107

a−7

.619

2c0.

6235

(0.9

398)

(0.7

875)

(0.5

504)

(1.2

611)

(0.6

022)

(2.6

534)

(0.3

016)

(1.7

230)

[125

]

Polit

ical

right

sin

dex

−2.1

852a

−1.4

376c

−0.5

438

1.28

31a

1.47

13a

——

5.68

93a

0.16

96(0

.562

5)(0

.802

8)(0

.363

1)(0

.405

8)(0

.324

3)(0

.346

2)[1

52]

−0.5

865

−1.0

240

−0.3

322

−0.2

927

−0.6

364

2.13

000.

6545

a−0

.044

20.

3409

(0.5

799)

(0.6

698)

(0.3

262)

(0.3

348)

(0.4

028)

(1.3

905)

(0.1

962)

(1.2

936)

[152

]

Ord

inar

yle

asts

quar

esre

gres

sion

sof

acr

oss-

sect

ion

ofco

untri

esar

ound

the

wor

ld.

The

depe

nden

tvar

iabl

esar

ecl

assi

fied

into

five

diffe

rent

grou

ps:

(i)in

terfe

renc

ew

ithth

epr

ivat

ese

ctor

;(ii

)ef

ficie

ncy;

(iii)

outp

utof

publ

icgo

ods;

(iv)s

ize

ofpu

blic

sect

or;a

nd(v

)pol

itica

lfre

edom

.R

obus

tsta

ndar

der

rors

are

show

nin

pare

nthe

ses.

The

inde

pend

entv

aria

bles

are:

(1)a

nav

erag

eof

five

indi

cato

rsof

ethn

olin

guis

ticfra

ctio

naliz

atio

n;(2

)ase

tof“

lega

lorig

in”

dum

mie

s(S

ocia

list,

Fren

ch,G

erm

an,S

cand

inav

ian,

and

the

omitt

eddu

mm

ybe

ing

Eng

lish)

;(3)

latit

ude;

and

(4)l

ogG

NP

per

capi

ta.

a Sig

nific

anta

t1%

leve

l.b

Sig

nific

anta

t5%

leve

l.c

Sig

nific

anta

t10%

leve

l.


Tabl

e5.

Gov

ernm

entP

erfo

rman

cean

dR

elig

ion

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticC

atho

licM

uslim

Oth

erLa

titud

eLo

gG

NP

Inte

rcep

tA

dj.

R2

fract

iona

lizat

ion

deno

min

atio

nspe

rcap

ita[N

]

Inte

rfere

nce

with

the

priv

ate

sect

orP

rope

rtyrig

hts

inde

x−0

.678

2b−0

.013

6a−0

.019

1a−0

.014

6a—

—4.

8511

a0.

1751

(0.2

837)

(0.0

033)

(0.0

036)

(0.0

044)

(0.2

669)

[124

]

0.59

77b

−0.0

018−0

.002

8−0

.000

81.

0599

c0.

5065

a−0

.621

40.

5534

(0.2

715)

(0.0

023)

(0.0

039)

(0.0

031)

(0.5

927)

(0.0

905)

(0.6

470)

[124

]

Bus

ines

sre

gula

tion

inde

x−0

.842

5a−0

.005

1c−0

.008

0b−0

.003

0—

—3.

3945

a0.

1280

(0.2

397)

(0.0

026)

(0.0

032)

(0.0

038)

(0.2

259)

[124

]

−0.0

938

0.00

220.

0044

0.00

69b

−0.5

668

0.50

19a−1

.084

90.

4832

(0.2

499)

(0.0

028)

(0.0

037)

(0.0

031)

(0.5

431)

(0.0

811)

(0.6

024)

[124

]

Top

mar

gina

ltax

rate

in−4

.195

0−0

.174

1a−0

.073

3−0

.121

0—

—54

.613

2a0.

1123

1994

(5.3

031)

(0.0

621)

(0.0

614)

(0.0

740)

(5.4

033)

[79]

10.3

710

−0.0

528

0.04

01−0

.028

721

.608

0b2.

3691

16.0

797

0.25

24(6

.554

5)(0

.065

2)(0

.067

7)(0

.079

3)(9

.827

6)(1

.876

5)(1

5.30

3)[7

9]

Effic

ienc

yC

orru

ptio

n−2

.749

0a−0

.037

2a−0

.043

0a−0

.028

1a—

—9.

7124

a0.

2856

(0.6

294)

(0.0

086)

(0.0

084)

(0.0

078)

(0.7

729)

[114

]

Con

tinue

d


Tabl

e5.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticC

atho

licM

uslim

Oth

erLa

titud

eLo

gG

NP

Inte

rcep

tA

dj.

R2

fract

iona

lizat

ion

deno

min

atio

nspe

rcap

ita[N

]

0.54

25−0

.008

8−0

.008

9−0

.000

24.

5201

a0.

7685

a−0

.795

30.

5785

(0.8

118)

(0.0

076)

(0.0

077)

(0.0

072)

(1.3

451)

(0.1

656)

(1.6

261)

[114

]

Bur

eauc

ratic

dela

ys−1

.398

3b−0

.027

5a−0

.036

8a−0

.019

5b—

—7.

3743

a0.

4174

(0.6

435)

(0.0

060)

(0.0

067)

(0.0

080)

(0.5

321)

[54]

0.46

64−0

.011

8b−0

.015

1c−0

.002

9−0

.179

10.

8158

a−0

.946

40.

7465

(0.5

602)

(0.0

048)

(0.0

076)

(0.0

054)

(0.9

667)

(0.1

608)

(1.3

895)

[54]

Tax

com

plia

nce

−0.6

224

−0.0

120−0

.008

1−0

.000

5—

—3.

8719

a0.

1934

(0.6

206)

(0.0

042)

(0.0

053)

(0.0

051)

(0.3

225)

[48]

0.07

04−0

.006

00.

0061

0.00

52−1

.366

9c0.

6488

a−1

.684

4c0.

5143

(0.5

118)

(0.0

046)

(0.0

068)

(0.0

049)

(0.7

438)

(0.0

962)

(0.9

590)

[48]

Avg

.go

vern

men

twag

es/

0.64

540.

0125

a0.

0220

a0.

0078

——

0.93

57a

0.30

44G

NP

perc

apita

(0.9

849)

(0.0

041)

(0.0

041)

(0.0

076)

(0.2

620)

[47]

0.56

920.

0039

0.01

02c−0

.001

1−0

.506

8−0

.292

34.

2686

a0.

3990

(0.8

712)

(0.0

042)

(0.0

057)

(0.0

096)

(0.9

240)

(0.1

828)

(1.5

396)

[47]

Out

puto

fpub

licgo

ods

Log

ofin

fant

mor

talit

y1.

4039

a0.

0083

a0.

0166

a0.

0082

a—

—2.

5138

a0.

4292

(0.1

656)

(0.0

027)

(0.0

024)

(0.0

033)

(0.2

244)

[151

]

Con

tinue

d


Tabl

e5.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticC

atho

licM

uslim

Oth

erLa

titud

eLo

gG

NP

Inte

rcep

tA

dj.

R2

fract

iona

lizat

ion

deno

min

atio

nspe

rcap

ita[N

]

0.40

47a

0.00

030.

0046

a−0

.001

6−0

.494

0b−0

.487

9a7.

2572

a0.

8506

(0.1

284)

(0.0

015)

(0.0

017)

(0.0

017)

(0.2

450)

(0.0

370)

(0.3

063)

[151

]

Log

ofsc

hool

atta

inm

ent

−0.8

640a

−0.0

043b−0

.011

2a−0

.003

1—

—2.

1424

a0.

4830

(0.1

414)

(0.0

017)

(0.0

017)

(0.0

022)

(0.1

458)

[102

]

−0.1

774

−0.0

008−0

.005

5a−0

.000

50.

1143

0.27

47a−0

.421

20.

7603

(0.1

255)

(0.0

018)

(0.0

017)

(0.0

020)

(0.2

684)

(0.0

391)

(0.3

175)

[102

]

Illite

racy

rate

27.7

599a

0.09

080.

3875

a0.

1598

——

3.65

100.

3860

(5.3

080)

(0.0

988)

(0.0

960)

(0.1

265)

(9.1

492)

[116

]

15.0

234a

0.03

130.

2490

a0.

0381

8.32

58−1

2.06

60a

96.5

462a

0.66

90(5

.131

6)(0

.067

4)(0

.071

8)(0

.090

6)(1

3.16

5)(1

.222

5)(1

0.48

8)[1

16]

Infra

stru

ctur

equ

ality

inde

x−1

.662

5b−0

.036

4a−0

.046

9a−0

.029

7b—

—9.

1259

a0.

3774

(0.7

231)

(0.0

081)

(0.0

085)

(0.0

113)

(0.6

915)

[54]

1.28

09b

−0.0

112c−0

.013

1−0

.003

00.

4773

1.17

32a−3

.384

9b0.

8059

(0.6

039)

(0.0

057)

(0.0

092)

(0.0

057)

(1.0

769)

(0.1

847)

(1.5

471)

[54]

Size

ofpu

blic

sect

or

Tran

sfer

san

dsu

bsid

ies

as%−1

2.66

3a−0

.086

0b−0

.109

0a−0

.072

9b—

—20

.169

4a0.

3414

ofG

DP

(1.9

090)

(0.0

331)

(0.0

281)

(0.0

347)

(2.7

997)

[88]

Con

tinue

d


Tabl

e5.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticC

atho

licM

uslim

Oth

erLa

titud

eLo

gG

NP

Inte

rcep

tA

dj.

R2

fract

iona

lizat

ion

deno

min

atio

nspe

rcap

ita[N

]

−0.5

782

0.03

95−0

.000

30.

0333

28.2

789a

0.86

17c−8

.248

40.

6950

(2.0

731)

(0.0

292)

(0.0

298)

(0.0

319)

(3.7

928)

(0.4

963)

(4.9

815)

[88]

Gov

ernm

entc

onsu

mpt

ion

as−2

.242

3−0

.096

2a−0

.063

9a−0

.085

1a—

—22

.859

4a0.

1932

%of

GD

P(1

.377

9)(0

.018

1)(0

.019

3)(0

.026

4)(1

.555

6)[1

00]

0.10

52−0

.075

0a−0

.032

3−0

.068

3b−0

.096

81.

1052

b12

.162

0a0.

2564

(1.5

478)

(0.0

192)

(0.0

227)

(0.0

279)

(3.1

882)

(0.5

137)

(4.4

892)

[100

]

SO

Es

inth

eec

onom

yin

dex−0

.908

30.

0036

−0.0

061−0

.006

1—

—4.

7480

a0.

0396

(0.7

474)

(0.0

089)

(0.0

085)

(0.0

122)

(0.7

444)

[100

]

−1.2

360

−0.0

026−0

.002

3−0

.006

7−4

.947

4b0.

6518

b1.

7897

0.12

77(0

.807

4)(0

.010

9)(0

.010

1)(0

.012

9)(2

.008

9)(0

.250

4)(1

.920

1)[1

00]

Pub

licse

ctor

empl

oym

ent/

−4.0

507a

−0.0

764a−0

.074

0a−0

.076

1a—

—11

.622

9a0.

4694

tota

lpop

ulat

ion

(0.6

329)

(0.0

158)

(0.0

135)

(0.0

146)

(1.4

097)

[100

]

−1.3

935

−0.0

498a−0

.042

2a−0

.045

4a2.

3145

0.94

98a

0.80

200.

6332

(0.6

972)

(0.0

128)

(0.0

121)

(0.0

140)

(1.7

412)

(0.2

490)

(2.2

609)

[100

]

Polit

ical

freed

om

Dem

ocra

cyin

dex

−3.0

046a

−0.0

550a−0

.086

5a−0

.069

2a—

—10

.859

3a0.

3026

(0.9

543)

(0.0

112)

(0.0

111)

(0.0

129)

(0.8

900)

[125

]

Con

tinue

d


Tabl

e5.

Con

tinue

d

Dep

ende

ntV

aria

bles

Inde

pend

entV

aria

bles

Eth

nolin

guis

ticC

atho

licM

uslim

Oth

erLa

titud

eLo

gG

NP

Inte

rcep

tA

dj.

R2

fract

iona

lizat

ion

deno

min

atio

nspe

rcap

ita[N

]

0.55

12−0

.020

4c−0

.035

7a−0

.025

9c0.

8540

1.73

78a−6

.501

6a0.

5741

(0.9

931)

(0.0

120)

(0.0

133)

(0.0

134)

(2.5

435)

(0.3

968)

(2.2

928)

[125

]

Pub

licrig

hts

inde

x−1

.532

3a−0

.012

7b−0

.043

2a−0

.025

4a—

—7.

2391

a0.

3510

(0.5

202)

(0.0

050)

(0.0

054)

(0.0

069)

(0.4

178)

[152

]

−0.0

755

−0.0

006−0

.029

1a−0

.013

2b2.

6524

a0.

4192

a2.

0483

0.47

55(0

.551

6)(0

.005

2)(0

.006

6)(0

.006

7)(0

.941

2)(0

.154

8)(1

.298

0)[1

52]

Ord

inar

yle

ast

squa

res

regr

essi

ons

ofa

cros

s-se

ctio

nof

coun

tries

arou

ndth

ew

orld

.Th

ede

pend

ent

varia

bles

are

clas

sifie

din

tofiv

edi

ffere

ntgr

oups

:(i)

inte

rfere

nce

with

the

priv

ate

sect

or;(

ii)ef

ficie

ncy;

(iii)

outp

utof

publ

icgo

ods;

(iv)s

ize

ofth

epu

blic

sect

or;a

nd(v

)pol

itica

lfre

edom

.R

obus

tsta

ndar

der

rors

are

show

nin

pare

nthe

ses.

The

inde

pend

entv

aria

bles

are:

(1)

anav

erag

eof

five

indi

cato

rsof

ethn

o-lin

guis

ticfra

ctio

naliz

atio

n;(2

)R

oman

Cat

holic

popu

latio

n(a

sa

%of

tota

l);(3

)M

uslim

popu

latio

n(a

sa

%of

tota

l);(4

)oth

erde

nom

inat

ions

whi

chis

the

resi

dual

popu

latio

nw

hich

does

notr

epor

tto

prof

ess

Pro

test

ant,

Cat

holic

,orM

uslim

relig

ions

(as

a%

ofto

talp

opul

atio

n)(th

eom

itted

popu

latio

nis

the

Pro

test

antp

opul

atio

n);(

5)la

titud

e;(6

)log

GN

Ppe

rcap

ita.

a Sig

nific

anta

t1%

leve

l.b

Sig

nific

anta

t5%

leve

l.c

Sig

nific

anta

t10%

leve

l.

256The

JournalofLaw,E

conomics,&

Organization,V15

N1

Table 6. Government Performance, Legal Origin, and Religion

Dependent Variables Independent Variables

Ethnolinguistic Socialist French German Scandinavian Catholic Muslim Other Latitude Log GNP Intercept Adj. R2

fractionalization legal origin legal origin legal origin legal origin religions per capita [N]

Interference with the private sector

Property rights index −0.7013b −1.3894a −0.7900a 0.9918a 0.9416c 0.0041 −0.0037 −0.0003 — — 3.9053a 0.3557

(0.3041) (0.3932) (0.2730) (0.2052) (0.5101) (0.0066) (0.0068) (0.0060) (0.5176) [124]

0.3843 −1.2522a −0.6531a 0.0519 −0.1921 0.0062 0.0024 0.0049 1.7985a 0.3892a −0.0431 0.6408

(0.2661) (0.3048) (0.1870) (0.2383) (0.4238) (0.0044) (0.0050) (0.0044) (0.5801) (0.0929) (0.7176) [124]

Business regulation index −1.0988a −1.2348a −0.3404 −0.1500 −0.0095 −0.0004 −0.0034 0.0040 — — 3.2539a 0.2299

(0.2759) (0.3420) (0.2277) (0.2375) (0.4170) (0.0053) (0.0055) (0.0053) (0.4318) [124]

−0.2661 -0.8376a −0.2491 −0.9027a −0.6382 0.0030 0.0039 0.0084c 0.1859 0.4570a −0.7207 0.5479

(0.2479) (0.2812) (0.1633) (0.1810) (0.4003) (0.0043) (0.0046) (0.0043) (0.5908) (0.0914) (0.6776) [124]

Top marginal tax rate in 1.4378 14.9193a 6.5827 10.5544c 11.1248 −0.1657 −0.0586 −0.0791 — — 45.8541a 0.2039

1994 (5.7018) (4.6331) (4.4391) (5.8712) (9.6287) (0.1233) (0.1103) (0.1152) (10.121) [79]

13.9829b 13.9606b 7.6698c 6.4841 7.1961 −0.0962 0.0159 −0.0215 16.8895 2.9196 8.9102 0.3229

(6.5626) (6.0011) (4.1466) (5.9912) (7.6966) (0.0908) (0.0918) (0.1023) (10.964) (1.8765) (15.468) [79]

Efficiency

Corruption −2.2008a −0.1559 −0.5023 1.4193 2.6055 −0.0115 −0.0204 −0.0087 — — 7.6444a 0.3237

(0.8273) (0.6641) (0.5516) (0.8955) (1.6767) (0.0203) (0.0189) (0.0180) (1.8791) [114]

Continued

TheQ

ualityofG

overnment

257

Table 6. Continued




0.5909 −0.0732 −0.2364 −0.0929 0.9132 0.0001 −0.0014 0.0067 4.3158a 0.7725a −1.3701 0.5818

(0.8821) (0.5916) (0.4404) (0.5779) (1.1987) (0.0149) (0.0143) (0.0134) (1.4094) (0.1984) (2.1381) [114]

Bureaucratic delays −2.0774a −2.0465a −1.0801a 0.1384 −2.3447a −0.0350a −0.0442a −0.0322a — — 9.1862a 0.6430

(0.6394) (0.5910) (0.4012) (0.4674) (0.8156) (0.0107) (0.0105) (0.0106) (0.8196) [54]

−0.2225 −0.7470 −0.5488c −0.0030 −1.6180b −0.0224b −0.0264b −0.0165c 0.1007 0.6362a 2.0056 0.7885

(0.6107) (0.6091) (0.3206) (0.3308) (0.6397) (0.0090) (0.0107) (0.0089) (1.1806) (0.2220) (2.0288) [54]

Tax compliance −1.4229b −1.9495a −1.4780a −0.5448c −1.4599b −0.0090 −0.0038 0.0071 — — 5.0747a 0.5201

(0.5966) (0.3106) (0.3036) (0.3203) (0.5636) (0.0079) (0.0086) (0.0075) (0.6132) [48]

−0.6969 −0.9764b −1.0886a −0.5867b −1.0331c −0.0056 0.0054 −0.0013 −1.0134 0.4711a 0.7286 0.6283

(0.6030) (0.4741) (0.2587) (0.2714) (0.5601) (0.0070) (0.0087) (0.0074) (0.7531) (0.1430) (1.5921) [48]

Avg. government wages / 0.9124 −0.7845a 1.2156a −0.0643 −0.3760 −0.0037 0.0045 0.0058 — — 1.3803c 0.5010

GNP per capita (0.8598) (0.2731) (0.3086) (0.2873) (0.6509) (0.0074) (0.0077) (0.0089) (0.7166) [47]

0.5150 −1.8937a 1.1686a 0.4324 −1.3567c −0.0200b −0.0204c −0.0091 2.4471b −0.8031a 8.5803a 0.6672

(0.7203) (0.5136) (0.3380) (0.3049) (0.7655) (0.0087) (0.0101) (0.0103) (0.9250) (0.1872) (1.8527) [47]

Output of public goods

Log of infant mortality 1.2610a 0.5676b 0.4244a −0.7441a −1.4558a −0.0056 0.0045 −0.0036 — — 3.4664a 0.5255

(0.1805) (0.2751) (0.1571) (0.2692) (0.2510) (0.0038) (0.0033) (0.0038) (0.2827) [151]

Continued

258The

JournalofLaw,E

conomics,&

Organization,V15

N1

Table 6. Continued




0.4020a 0.1408 0.2609a 0.0983 −0.4970b −0.0053b 0.0000 −0.0053b −0.4252 −0.4754a 7.4267a 0.8637

(0.1300) (0.1727) (0.0794) (0.1268) (0.2120) (0.0025) (0.0024) (0.0025) (0.2836) (0.0415) (0.3683) [151]

Log of school attainment −0.7840a 0.3276a −0.2593b 0.1521 0.3324 0.0004 −0.0069b −0.0008 — — 1.8889a 0.5322

(0.1499) (0.1058) (0.1065) (0.1416) (0.2476) (0.0032) (0.0031) (0.0034) (0.2801) [102]

−0.1821 0.4050a −0.1914a −0.2251b −0.1966 −0.0000 −0.0045 0.0011 0.0249 0.2942a −0.4628 0.7974

(0.1199) (0.0964) (0.0643) (0.0916) (0.1932) (0.0025) (0.0023) (0.0028) (0.2611) (0.0389) (0.3354) [102]

Illiteracy rate 27.0753a 7.7474 8.9148c −12.881b — −0.0490 0.2737a 0.0884 — — 8.5013 0.4226

(5.4717) (10.479) (4.9304) (6.1284) (0.1245) (0.1229) (0.1544) (9.7099) [116]

12.5505b −10.404 6.8149c −5.0399 — −0.0497 0.1873b 0.0537 5.7156 −12.2460a 99.6097a 0.6878

(5.0585) (9.8843) (3.5124) (4.6052) (0.0874) (0.0867) (0.1077) (12.903) (1.3433) (10.965) [116]

Infrastructure quality index −2.6254a −3.3972a −1.1956a 0.4224 −3.1489a −0.0482a −0.0587a −0.0458a — — 11.5389a 0.6711

(0.6199) (0.7994) (0.4079) (0.6621) (1.1454) (0.0131) (0.0126) (0.0127) (1.1681) [54]

0.2361 −1.8375b −0.3693 0.2153 −2.2470a −0.0284a −0.0328a −0.0204b 1.6779 0.7915a 1.4527 0.8647

(0.5079) (0.7730) (0.2823) (0.4692) (0.7525) (0.0091) (0.0109) (0.0087) (1.0857) (0.2180) (1.9191) [54]

Size of public sector

Transfers and subsidies as % −10.429a 10.0018a −1.6490 0.7443 5.8750 −0.0259 −0.0514 −0.0422 — — 15.2889b 0.4266

of GDP (2.2704) (2.7618) (2.1624) (3.1120) (6.5351) (0.0782) (0.0697) (0.0682) (6.4337) [88]

Continued

TheQ

ualityofG

overnment

259

Table 6. Continued




−0.3402 6.1352b 0.3590 −3.6369 −0.5825 0.0218 −0.0087 0.0157 24.1427a 1.5940a −11.3810b 0.7297

(2.0479) (3.0242) (1.2501) (2.3440) (4.3890) (0.0415) (0.0393) (0.0394) (3.9456) (0.5324) (5.3205) [88]

Government consumption as −3.0761c −5.0546a −0.7166 −1.7008 0.2411 −0.0843b −0.0558c −0.0714c — — 22.7980a 0.2316

% of GDP (1.5586) (1.5113) (1.1828) (1.9574) (3.2478) (0.0332) (0.0303) (0.0383) (2.6229) [100]

−0.4569 −5.4747a −0.4151 −3.4240c −1.4461 −0.0706b −0.0339 −0.0576 3.1099 0.9854c 12.5943b 0.3074

(1.5940) (1.4245) (1.0868) (2.0800) (3.0986) (0.0312) (0.0315) (0.0370) (3.4085) (0.5706) (5.3128) [100]

SOEs in the economy index −1.7574b −5.0152a 0.0354 0.3548 −2.0452 −0.0098 −0.0189 −0.0091 — — 6.2642a 0.2450

(0.7749) (0.5294) (0.5594) (1.0483) (1.4665) (0.0180) (0.0161) (0.0177) (1.5382) [100]

−1.5762c −4.5385a −0.0379 0.0848 −1.9666 −0.0094 −0.0137 −0.0089 −1.8264 0.3692 3.8933 0.2648

(0.8258) (0.6178) (0.5697) (1.0463) (1.3848) (0.0184) (0.0165) (0.0181) (1.9240) (0.2416) (2.2718) [100]

Public sector employment / −3.3400a −0.3848 −1.1109b −0.6880 8.0477a −0.0075 −0.0149 −0.0147 — — 6.2029a 0.5978

total population (0.6646) (0.9318) (0.4833) (0.9384) (1.8996) (0.0167) (0.0143) (0.0159) (1.4515) [100]

−0.9215 0.6805 −0.7417c −2.5817b 6.9815a 0.0042 0.0068 0.0038 −0.1045 1.2912a −5.3766b 0.7657

(0.5762) (0.8417) (0.3940) (1.6003) (1.6004) (0.0124) (0.0117) (0.0141) (2.0524) (0.2835) (2.3324) [100]

Political freedom

Democracy index −3.5236a −4.9840a −2.5819a 0.4810 1.5197 −0.0081 −0.0464 −0.0302 — — 9.0226a 0.4262

(1.1404) (0.8777) (0.8671) (1.5157) (2.0742) (0.0265) (0.0247) (0.0250) (2.3289) [125]

Continued

260The

JournalofLaw,E

conomics,&

Organization,V15

N1

Table 6. Continued




−0.2370 −4.2093a −2.1704a −2.4051b −1.2381 0.0031 −0.0203 −0.0085 3.2446 1.4940a −5.1883c 0.6511

(1.0095) (0.9607) (0.6412) (1.1647) (1.6795) (0.0217) (0.0212) (0.0216) (2.6246) (0.3303) (2.9477) [125]

Political rights index −1.5088a −1.0721 −0.7744c 0.9945a 0.6585 −0.0006 −0.0327a −0.0154 — — 6.5948a 0.3792

(0.5672) (0.7895) (0.4081) (0.3667) (0.6596) (0.0092) (0.0090) (0.0096) (0.7466) [152]

−0.2595 −1.3386c −0.7521c −0.4058 −1.5218b −0.0003 −0.0305a −0.0137 3.9678a 0.3138c 2.9411b 0.5005

(0.5705) (0.6793) (0.3711) (0.4524) (0.6528) (0.0084) (0.0086) (0.0087) (1.0809) (0.1631) (1.4209) [152]

Ordinary least squares regressions of a cross-section of countries around the world. The dependent variables are classified into five different groups: (i) interference with the private sector;(ii) public sector efficiency; (iii) output of public goods; (iv) size of public sector; and (v) political freedom. Robust standard errors are shown in parentheses. The independent variables are:(1) an average of 5 indicators of ethno-linguistic fractionalization; (2) a set of “legal origin” dummies (French, Socialist, German, Scandinavian and the omitted dummy being English); (3) RomanCatholic population (as a % of total); (4) Muslim population (as a % of total); (5) residual population (as a % of total); (5) other denominations which is the residual population which does notreport to profess Protestant, Catholic, or Muslim religions (as a % of total population) (the omitted population is the Protestant population); (6) latitude; (7) log GNP per capita.aSignificant at 1% level.bSignificant at 5% level.cSignificant at 10% level.


theory would suggest. Alternatively these results may mean that people in highEF countries are less productive, perhaps because of private rent seeking andwarfare, and that low income in turn adversely influences government. Becausethe first interpretation seems to us to be more straightforward, we interpret theEF evidence as supporting the political theories of institutions.13

4.2 Legal OriginThe regressions in Table 4 also assess the influence of legal origin on governmentperformance. To begin, the results of the effects of the socialist legal originare exactly as predicted by the political theory. Compared to those in commonlaw countries, and even controlling for per capita income, latitude, and EF,government in countries of socialist legal origin are more interventionist acrossthe board (have worse protection of property rights, more intrusive regulation,and higher tax rates) as well as being less efficient (lower score on bureaucraticdelays and tax compliance, though not on corruption). Of interest, they havelower relative wages of public sector employees. Socialist origin countrieshave higher infant mortality, though not controlling for how poor they are, andpoorer infrastructure quality, even controlling for per capita income. However,they do very well on school attainment, especially controlling for how poor theyare—some evidence that their egalitarianism or militarism benefits education.Turning to the size of government, socialist origin countries have sharply highertransfers and subsidies and more state enterprises, but also lower governmentconsumption, than common law countries ceteris paribus. In general, then, wesee that socialist law is associated with more interventionism, less efficiency,bigger government transfers, and less democracy—consistent with the obviouspolitical story that socialist policies serve to enhance the power of the State.

The results on the French legal origin are equally striking. Compared tocommon law countries, French origin countries are sharply more interventionist(have higher top rates, less secure property rights, and worse regulation). Theyalso have less efficient governments, as measured by bureaucratic delays andtax compliance, though not the corruption score. French origin countries payrelatively higher wages to bureaucrats than common law countries do, thoughthis does not buy them greater government efficiency. French origin countriesfall behind common law countries in public good provision: they have higherinfant mortality, lower school attainment, higher illiteracy rates, and lowerinfrastructure quality. There is not much evidence of a difference in the patternof government spending, except that French origin countries have lower publicemployment. Finally, French origin countries score worse on our democracymeasures than the common law countries. Most of these results hold bothwith and without per capita income and latitude controls. As predicted bythe political theory then, the state-building intent incorporated into the designof the French legal system translates, many decades later, into significantly

13. EF may reduce productivity because it undermines human capital accumulation. To theextent that EF does that through undermining public education, however, the direct effect is on thegovernment institution of public education rather than on productivity.


more interventionist and less efficient government, less political freedom, andevidently less provision of basic public goods.

The results on the German legal origin suggest that these countries are rathersimilar to those of common law origin, controlling for income and latitude.These controls are particularly important because German origin countries aregenerally located in central Europe and East Asia and tend to be relatively rich.Finally, compared to common law countries, Scandinavian origin countries aresharply more interventionist (in fact, the pattern of coefficients here is similarto that for socialist countries), though—with a notable exception of lower taxcompliance—they do not have less efficient governments. Scandinavian origincountries also tend to have better public goods and higher public spending thancommon law countries. Controlling for per capita income and latitude reducesthe difference, although in the area of public employment, the Scandinavianorigin countries are out on a limb, even controlling for income. These resultspoint to important differences between civil law countries of different origins.In particular, the German and Scandinavian evidence—while consistent withthe political theory of institutions—is not nearly as striking as that for countriesusing French law.

The contrast between the socialist, common law, and French origins, how-ever, is very significant and persistent across the variety of measures. Gov-ernments in the socialist law countries are the most antimarket, and those inthe common law countries the most promarket, with governments in Frenchorigin countries in the middle. The fact that this political heritage matters somuch for government performance supports the political theory of institutions,especially when combined with the evidence on the importance of EF.

4.3 Religious AffiliationTable 5 reports the effects of religious affiliations on government performance.Recall that we exclude from the regression the percentage of each country’spopulation reporting to be Protestants. Note first that the results on EF inTable 5 are similar to those in Table 4: EF has a sharp negative influence ongovernment performance, but this influence is captured by the lower per capitaincome (and closeness to the equator) of high EF countries.

Table 5 reveals that both Catholic and Muslim affiliations of the populationare associated with worse government performance, though, as in the case withEF, both of these influences generally become insignificant once per capitaincome and latitude are controlled for.

Begin with the Catholic affiliation. With the notable exception of the marginaltax rate, Catholic countries are generally more interventionist. Their govern-ments are also less efficient, including more corrupt, but better paid. Catholiccountries do worse on public good provision than Protestant countries, they havesmaller transfers, government consumption, and public sector employment, andare significantly less democratic. Virtually all of these effects, however, becomeinsignificant once we control for per capita income and latitude. As with EF,there are two stories. The one we find less plausible suggests that Catholics areless productive, and this translates into inferior government. The more plausible


argument is that the worse-functioning governments of the Catholic countriesreduce income, with the result that the adverse effect of the religious affiliationon the quality of government is in part captured by per capita income.14

The effect of the Muslim affiliation is generally in the same direction asthat of the Catholic affiliation, only stronger. Muslim countries tend to havemore interventionist and less efficient, but better paid, governments, althoughthese effects are generally captured by their lower per capita income. Thereis a remarkably large negative effect of the Muslim affiliation on public goodprovision, which appears to be strong enough to survive the income and latitudecontrols.15 Muslim countries also tend to have smaller governments (thoughless so with controls), and be sharply less democratic, even controlling for theirpoverty. Muslim affiliation thus has a pronounced adverse effect on governmentperformance. If we take the view that the amelioration of this effect whenper capita income is included is a consequence of the adverse effects of badgovernment on income, the problem to be explained only gets bigger.

Finally, we note two side issues that come up in these regressions. First,the results on relative government wages show that both Muslim and Catholiccountries pay higher relative government wages than Protestant countries do,but their bureaucracies are still less efficient. The story with government wagesand corruption is thus more complicated than the World Bank, inspired by theEast Asian experience, would argue (World Bank 1995). In many Catholic andMuslim countries, officials are paid relatively well, but still misuse their power.There are more basic factors determining government efficiency than just therelative pay of the bureaucrats.16

Second, compared to Protestant countries, both Catholic and Muslim coun-tries exhibit both poor government performance and low tax rates combinedwith small government transfers and consumption. This evidence, as well asall the other evidence we have presented, seems squarely inconsistent with theidea that a good government is a small government. Rather, poorly functioninggovernments tend to be relatively small, and collect fewer taxes, whereas well-functioning governments tend to be much larger, presumably at least in partwith the consent of the governed. This view is consistent with the finding thatthe one activity that poorly functioning governments do more of is operate statefirms—a redistributive rather than wealth-creating function. This view is alsoconsistent with historical research (Brewer, 1988) and with the recent evidencefrom the postcommunist transition (Johnson, Kaufman, and Shleifer, 1997).

14. As with ethnic fractionalization, particular religious affiliations may adversely affect humancapital accumulation, which in turn reduces income. As with EF, one way in which this happensis that religion undermines public education, so the causation is through government.

15. Since we are looking at the outcome of public good provision, as opposed to just governmentexpenditure on it, our evidence is inconsistent with the theory that Catholic or Muslim religionssubstitute for the lack of public provision of education through their own provision.

16. An alternative interpretation of these findings is that in Catholic and Muslim countries generaleducational attainment is low, and hence the bureaucrats are relatively overpaid because they arebetter educated relative to the rest of the population than are the Protestant bureaucrats.


4.4 Law or Religion?The evidence in Table 5 does not tell us whether the negative influences ofCatholic and Muslim affiliations on government performance are a consequenceof troubled political history or of culture. We have made a number of a prioriarguments suggesting that cultural theories can work through politics, and that apolitical interpretation of the religious variables may be more appropriate. Thatis, the use of religion for political purposes in Muslim and Catholic countries,and the destructive competition between Church and State in Catholic countriesin particular, may have shaped policies in ways that ended up being quite hostileto market development. It is possible that such politics worked by adverselyaffecting tolerance, as in Landes (1998), or trust, as in Putnam (1993) andLa Porta et al. (1997b), but the heritage that adversely affects governmentperformance seems to be largely political.

However, as we noted earlier, legal origins and religious affiliations are cor-related with each other. To understand the facts better, as well as to makefurther progress in interpreting the evidence, we would like to know which setof variables, if any, wins out in a horse race. As a final step therefore, we runregressions that include EF, legal origins, and religious affiliations in the samespecification. Table 6 presents the results.

We can summarize the findings without discussing each regression individ-ually. EF survives as an important determinant of government performance.Moreover, as a general rule, legal origins—particularly socialist and French—continue to exert significant adverse influence on government performance,even controlling for religion. Religious variables, however, generally becomeinsignificant. Catholic affiliation loses its statistical significance almost always(exceptions are bureaucratic delays, infrastructure quality, and government con-sumption), as does the Muslim affiliation (exceptions are bureaucratic delays,school attainment, illiteracy, and infrastructure quality). Statist laws are thusa more robust predictor of poor government performance than interventionistreligions.

If we take religion as a proxy for cultural influences on government, andEF and law as proxies for political influences, this evidence provides furthersupport for the political theories. In our data, these political variables providethe most pervasive, and relatively clearly interpretable, influence on governmentperformance.

4.5 Other FactorsThere are two variables—colonial status and continent—that we have not in-cluded in our statistical analysis which arguably qualify as potentially exoge-nous determinants of government performance, and which are often used in thecross-sectional studies of economic growth. For completeness, we make somecomments about these variables.

Several writers measure whether a country is a former colony, and, if so,what country it was a colony of (Barro, 1996b; Treisman, 1997; Hall andJones, 1999). The usual justification for using this variable is that the colonizerhas transplanted into the colony some of its key institutions, such as religion


and law, which in turn influenced subsequent development. We already includereligion and law as independent variables, and hence measure these possiblecolonial influences directly rather than indirectly. As important, we have foundit difficult to identify the colonial status of particular countries. For example,Barro (1996b) does not classify Hungary, Czechoslovakia, or Italy as formercolonies, even though each was at times (at least partially) controlled by the Hab-sburg empire, and the former two were arguably colonized by the Soviet Unionas well. Because of such difficulties, we stick to our more direct measures.

From the theoretical viewpoint, the justification for using continents as deter-minants of government performance is also problematic. Various writers findslow growth in Latin America and Africa (Barro, 1991; Easterly and Levine,1997), but the significance of the continent effects is attributed to the omittedinstitutional factors, such as religion or, as Easterly and Levine (1997) arguedirectly for Africa, EF. Since we measure the political and cultural influenceson performance directly, the case for including the continent effects is weak.We also include latitude in the regressions, which is the one theoretically jus-tified measure of geography. Still, we have rerun our regressions controllingfor continents. These controls have predictable effects. The Africa dummyin particular weakens but does not eliminate the effect of EF, and the LatinAmerica dummy weakens but does not eliminate the effects of French laws orCatholicism. Again, we take this evidence to mean not that the continents havean independent influence on government performance, but rather that they serveas proxies for the more fundamental determinants of the quality of governmentdiscussed in this article.

5. ConclusionWe have set out to examine whether, from the perspective of promoting devel-opment, the quality of government across countries varies in systematic ways.We assess the quality of government using proxies for interventionism, publicsector efficiency, quality of public good provision, government size, and politi-cal freedom. The data show clearly that, using these measures of performance,the quality of governments varies systematically across countries. Rich nationshave better governments than poor ones. Ethnolinguistically homogeneouscountries have better governments than the heterogeneous ones. Common lawcountries have better governments than French civil law or socialist law coun-tries. Predominantly Protestant countries have better governments than eitherpredominantly Catholic or predominantly Muslim countries. These results tendto be consistent across the many measures of government performance we used.

These results present clear evidence of systematic influence of historicalcircumstances, as captured by ethnolinguistic heterogeneity, legal origins, andreligion, on government performance. Government performance is surely inpart determined by economic development, but it is also shaped by systematicvariation in the histories of individual countries. This conclusion, we believe,is strongly supported by the data.

The results are more difficult to interpret as supporting a particular version ofpolitical or cultural theories of institutions. Taken as a whole, however, the re-


sults support the political theories, since ethnolinguistic heterogeneity and legalorigin remain extremely important factors shaping government performance,even controlling for religion. In addition to showing that history matters, webelieve that we have provided some evidence that it is political history thatmatters most clearly. At the same time we would not interpret our evidence asoutright rejecting the cultural theories of institutions.

Finally, we have consistently found that the better performing governmentsare larger and collect higher taxes. Poorly performing governments, in contrast,are smaller and collect fewer taxes. This result does not of course imply that it isoften, or ever, socially desirable to expand a government of a given quality, butit tells us that identifying big government with bad government can be highlymisleading. The question of how the better governments get to be bigger, orvice versa, remains open for future work.

Appendix A

Summary statistics

Variable Number Mean Standard Minimum Maximumof obs. Deviation

Interference with private sector:

Property rights index 149 3.2752 1.1500 1.0 5.0Regulation index 149 2.7047 0.9480 1.0 5.0Top marginal tax rate 82 41.390 12.2812 0.0 66.0

Efficiency:

Corruption index 126 5.6532 2.2945 0.1786 10.0Bureaucratic delays 60 4.6872 1.4454 2.0292 7.7760Tax compliance 49 3.1571 1.0019 1.43 5.05Avg. government wages / 63 1.9111 1.2816 0.1 7.1GNP per capita

Output of public goods:

Log infant mortality 196 3.7207 0.9020 1.9792 5.2444Log school achievement 106 1.3934 0.5900 0.1484 2.4356Illiteracy rate 128 31.0057 22.5418 1.8 81.3Infrastructure quality 60 5.5284 1.8732 1.5 9.1521

Size of public sector:

Transfers and subsidies as 90 9.1837 8.3419 0.1 37.2% of GDPGovernment consumption as 104 15.028 4.9606 6.68 33.8% of GDPSOEs in the economy 104 4.3654 2.2212 0.0 10.0Public sector employment as 124 4.3773 3.2256 0.4 17.3973% of population

Continued


Appendix A Continued

Variable Number Mean Standard Minimum Maximumof obs. Deviation

Political freedom:

Democracy index 161 3.6739 3.8922 0.0 10.0Political rights index 209 4.6029 2.2361 1.0 7.0

Determinants:

Ethno-linguistic 161 0.3264 0.3006 0.0 1.0fractionalizationEnglish legal origin 212 0.3443 0.4763 0.0 1.0Socialist legal origin 212 0.1651 0.3721 0.0 1.0French legal origin 212 0.4339 0.4967 0.0 1.0German legal origin 212 0.0330 0.1791 0.0 1.0Scandinavian legal origin 212 0.0236 0.1521 0.0 1.0Protestant population as 206 14.6932 23.3400 0.0 99.8% of totalRoman Catholic population as 209 32.4077 36.1883 0.0 99.1% of totalMuslim population as % of total 209 21.7399 35.2773 0.0 99.9Other populations as % of total 206 30.9192 31.8005 0.0 100.0

Economic Development:

Latitude 209 0.2810 0.1885 0.0 0.8Log GNP per capita 186 7.2858 1.3572 4.6471 10.1517


App

endi

xB

Inde

pend

entv

aria

bles

byco

untry

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Afg

hani

stan

afg

0.44

840

01

00

0.00

0.00

99.3

00.

700.

3667

5.26

44A

lban

iaal

b0.

0017

01

00

00.

000.

0020

.50

79.5

00.

4556

6.06

38A

lger

iadz

a0.

2937

00

10

00.

000.

5099

.10

0.40

0.31

117.

4568

Am

eric

anS

amoa

asm

10

00

076

.00

20.6

00.

003.

400.

1578

8.18

64A

ndor

raad

o0

01

00

0.50

99.1

00.

000.

400.

4700

Ang

ola

ago

0.77

280

01

00

19.8

068

.70

0.00

11.5

00.

1367

6.40

80A

ntig

uaan

dB

arbu

daat

g0.

0000

10

00

042

.20

10.2

00.

4047

.20

0.18

928.

4185

Arg

entin

aar

g0.

1769

00

10

02.

7091

.60

0.20

5.50

0.37

788.

1177

Arm

enia

arm

01

00

00.

000.

000.

0010

0.00

0.44

447.

2282

Aru

baab

w0

01

00

8.00

86.0

00.

006.

000.

1367

Aus

tralia

aus

0.11

281

00

00

23.5

029

.60

0.20

46.7

00.

3000

9.33

27A

ustri

aau

t0.

0332

00

01

06.

5088

.80

0.60

4.10

0.52

449.

3520

Aze

rbai

jan

aze

0.00

000

10

00

0.00

0.00

93.4

06.

600.

4478

6.87

73B

aham

as,T

hebh

s0.

0000

10

00

047

.20

25.5

00.

0027

.30

0.26

838.

8955

Bah

rain

bhr

10

00

00.

900.

8095

.00

3.30

0.28

898.

9605

Ban

glad

esh

bgd

0.00

001

00

00

0.20

0.20

85.9

013

.70

0.26

675.

0582

Bar

bado

sbr

b0.

0733

10

00

033

.20

5.90

0.20

60.7

00.

1456

8.27

13B

elar

usbl

r0

10

00

0.00

14.0

00.

0086

.00

0.55

897.

9818

Bel

gium

bel

0.36

380

01

00

0.40

90.0

01.

108.

500.

5611

9.35

66B

eliz

ebl

z0.

4091

10

00

013

.20

66.8

00.

0020

.00

0.19

067.

0908

Ben

inbe

n0.

6831

00

10

02.

8018

.50

15.2

063

.50

0.10

335.

7114

Ber

mud

abm

u0.

0000

10

00

027

.00

18.6

00.

0054

.40

0.35

789.

6338

Bhu

tan

btn

0.43

751

00

00

0.00

0.00

5.00

95.0

00.

3033

5.98

07B

oliv

iabo

l0.

5994

00

10

02.

3092

.50

0.00

5.20

0.18

896.

2779

Bos

nia

and

Her

zego

vina

bih

01

00

04.

0015

.00

40.0

041

.00

0.48

89

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Bot

swan

abw

a0.

3775

10

00

026

.80

9.40

0.00

63.8

00.

2444

7.13

06B

razi

lbr

a0.

0558

00

10

04.

0087

.80

0.10

8.10

0.11

117.

5254

Bru

nei

brn

0.50

001

00

00

1.10

3.20

64.2

031

.50

0.04

7810

.045

5B

ulga

riabg

r0.

1157

01

00

00.

400.

5010

.60

88.5

00.

4778

7.62

32B

urki

naFa

sobf

a0.

5467

00

10

01.

609.

0043

.00

46.4

00.

1444

5.33

79B

urun

dibd

i0.

0133

00

10

04.

9078

.30

0.90

15.9

00.

0367

5.17

79C

ambo

dia

khm

0.13

350

10

00

0.10

0.10

2.40

97.4

00.

1444

5.35

66C

amer

oon

cmr

0.85

200

01

00

18.1

035

.00

22.0

024

.90

0.66

676.

4922

Can

ada

can

0.37

621

00

00

29.6

046

.60

0.60

23.2

00.

6667

9.43

92C

ape

Verd

ecp

v0.

3750

00

10

03.

0095

.90

0.00

1.10

0.17

786.

1755

Cay

man

Isla

nds

cym

10

00

092

.40

2.60

0.00

5.00

0.21

44C

entra

lAfri

can

Rep

ublic

caf

0.78

560

01

00

50.0

033

.10

3.20

13.7

00.

0778

5.65

65C

had

tcd

0.66

620

01

00

11.6

021

.00

44.0

023

.40

0.16

675.

0508

Chi

lech

i0.

0506

00

10

01.

9082

.10

0.00

16.0

00.

3333

7.52

52C

hina

chn

0.23

330

10

00

0.00

0.00

2.40

97.6

00.

3889

5.99

46C

olom

bia

col

0.05

580

01

00

0.90

96.6

00.

202.

300.

0444

6.93

96C

omor

roIs

land

com

1.00

000

01

00

0.10

0.10

99.7

00.

100.

1344

6.09

81C

ongo

cog

0.66

930

01

00

24.9

053

.90

0.40

20.8

00.

0111

6.66

13C

osta

Ric

acr

i0.

0532

00

10

05.

8090

.50

0.00

3.70

0.11

117.

2865

Cot

ed’

Ivoi

reci

v0.

8565

00

10

04.

7018

.50

24.0

052

.80

0.08

896.

5819

Cro

atia

hrv

01

00

00.

4076

.50

1.20

21.9

00.

5011

7.91

81C

uba

cub

01

00

00.

8032

.00

0.00

67.2

00.

2367

Cyp

rus

cyp

0.30

001

00

00

0.60

1.30

18.5

079

.60

0.38

898.

6090

Cze

chR

epub

liccz

e0

10

00

4.60

39.2

00.

0056

.20

0.54

948.

0889

Den

mar

kdn

k0.

0275

00

00

195

.20

0.60

0.20

4.00

0.62

229.

5613

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Djib

outi

dji

0.71

430

01

00

0.20

6.70

90.6

02.

500.

1256

Dom

inic

adm

a0.

5000

10

00

08.

3089

.80

0.00

1.90

0.14

787.

1474

Dom

inic

anR

epub

licdo

m0.

0108

00

10

01.

4096

.60

0.00

2.00

0.21

116.

8041

Ecu

ador

ecu

0.32

540

01

00

1.90

96.4

00.

001.

700.

0222

6.89

46E

gypt

,Ara

bR

epub

liceg

y0.

0231

00

10

00.

200.

2081

.80

17.8

00.

3000

6.28

51E

quat

oria

lGui

nea

gnq

0.62

500

01

00

4.90

71.3

00.

5023

.30

0.02

225.

9369

Erit

rea

eri

00

10

00.

0033

.00

0.16

67E

ston

iaes

t0

10

00

66.0

02.

000.

0131

.99

0.65

568.

1819

Eth

iopi

aet

h0.

6771

00

10

03.

800.

7031

.40

64.1

00.

0889

4.99

23Fa

roe

Isla

nds

fro0

01

00

99.8

00.

100.

000.

100.

6889

Fiji

fji0.

8000

10

00

039

.10

9.00

7.80

44.1

00.

2000

7.34

58Fi

nlan

dfin

0.10

500

00

01

93.1

00.

100.

006.

800.

7111

9.40

51Fr

ance

fra0.

1455

00

10

02.

4076

.40

3.00

18.2

00.

5111

9.42

29Fr

ench

Poly

nesi

apy

f0

01

00

54.0

039

.40

0.00

6.60

0.16

678.

4025

Fren

chG

uian

agu

f0

01

00

3.90

87.0

01.

008.

100.

0444

7.67

04G

abon

gab

0.79

670

01

00

18.8

065

.20

0.80

15.2

00.

0111

8.20

50G

ambi

a,Th

egm

b0.

7804

10

00

00.

401.

9084

.80

12.9

00.

1476

5.60

13G

eorg

iage

o0

10

00

0.00

1.00

11.0

088

.00

0.46

677.

1468

Ger

man

yade

u0.

0438

00

01

046

.40

35.0

00.

0218

.58

0.56

6710

.151

7G

hana

gha

0.70

611

00

00

25.8

018

.70

15.7

039

.80

0.08

895.

8978

Gre

ece

grc

0.07

780

01

00

0.10

0.40

1.50

98.0

00.

4333

8.34

88G

reen

land

grl

00

10

098

.60

0.10

0.00

1.30

0.80

00G

rena

dagr

d0.

0000

10

00

013

.20

64.4

00.

2022

.20

0.13

417.

7341

Gua

delo

upe

glp

0.00

000

01

00

1.90

95.1

01.

101.

900.

1794

7.84

29G

uam

gum

10

00

016

.40

79.5

00.

004.

100.

1476

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Gua

tem

ala

gtm

0.47

670

01

00

4.90

94.0

00.

001.

100.

1700

6.81

43G

uine

agi

n0.

7598

00

10

00.

101.

1069

.00

29.8

00.

1222

6.17

12G

uine

a-bi

ssau

gnb

0.85

000

01

00

0.60

10.2

038

.30

50.9

00.

1333

5.26

66G

uyan

agu

y0.

2378

10

00

018

.00

18.0

09.

0055

.00

0.05

566.

2404

Hai

tiht

i0.

0644

00

10

012

.80

82.6

00.

004.

600.

2111

5.54

58H

ondu

ras

hnd

0.09

740

01

00

2.60

95.8

00.

101.

500.

1667

6.37

62H

ong

Kon

ghk

g0.

2368

10

00

07.

507.

900.

5084

.10

0.24

618.

9795

Hun

gary

hun

0.06

510

10

00

21.6

053

.90

0.00

24.5

00.

5222

7.82

21Ic

elan

dis

l0.

1000

00

00

196

.60

0.70

0.00

2.70

0.72

229.

5796

Indi

ain

d0.

7422

10

00

01.

101.

3011

.60

86.0

00.

2222

5.52

15In

done

sia

idn

0.69

060

01

00

4.80

2.70

43.4

049

.10

0.05

566.

1649

Iran

irn0

01

00

0.00

0.10

97.9

02.

000.

3556

7.89

99Ira

qirq

00

10

00.

001.

8095

.80

2.40

0.36

67Ire

land

irl0.

0904

10

00

01.

1095

.30

0.00

3.60

0.58

898.

7672

Isle

ofM

anim

y1

00

00

20.9

010

.00

0.00

69.1

00.

6017

Isra

elis

r0.

3271

10

00

00.

201.

008.

0090

.80

0.34

788.

8921

Italy

ita0.

0389

00

10

00.

4083

.20

0.10

16.3

00.

4722

9.17

11Ja

mai

caja

m0.

0125

10

00

055

.50

9.60

0.10

34.8

00.

2017

7.14

16Ja

pan

jpn

0.00

990

00

10

0.90

0.60

0.00

98.5

00.

4000

9.58

34Jo

rdan

jor

0.02

970

01

00

0.30

1.70

93.0

05.

000.

3444

7.39

47K

azak

stan

kaz

01

00

02.

003.

0047

.00

48.0

00.

5333

7.55

71K

enya

ken

0.82

701

00

00

19.3

026

.40

6.00

48.3

00.

0111

5.73

04K

iriba

tiki

r0.

5000

10

00

045

.30

49.0

00.

005.

700.

0139

6.69

48K

orea

,Sou

thko

r0.

0000

00

01

012

.20

3.90

0.00

83.9

00.

4111

8.03

38K

orea

,Dem

ocra

ticR

ep.

prk

01

00

00.

000.

000.

0010

0.00

0.44

44

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Kuw

ait

kwt

00

10

00.

102.

1095

.10

2.70

0.32

569.

5581

Kyr

gyz

Rep

ublic

kgz

01

00

00.

000.

0070

.00

30.0

00.

4556

6.94

97La

o,Pe

ople

’sD

em.

R.

lao

0.25

000

10

00

0.20

0.80

1.00

98.0

00.

2000

5.57

03La

tvia

lva

01

00

014

.10

18.2

00.

0167

.69

0.63

338.

0794

Leba

non

lbn

0.11

400

01

00

1.00

36.2

037

.40

25.4

00.

3722

7.49

89Le

soth

ols

o0.

2098

10

00

029

.80

43.5

00.

0026

.70

0.32

566.

0115

Libe

rialb

r0.

8031

10

00

018

.60

1.90

21.2

058

.30

0.07

006.

1408

Liby

alb

y0.

1214

00

10

00.

100.

2098

.10

1.60

0.27

788.

7087

Liec

hten

stei

nlie

00

01

010

.70

87.9

00.

001.

400.

5233

Lith

uani

altu

01

00

080

.00

0.00

0.62

227.

8258

Luxe

mbo

urg

lux

0.21

670

01

00

1.20

93.0

00.

005.

800.

5494

9.83

36M

acao

mac

00

10

00.

508.

800.

0090

.70

0.24

56M

aced

onia

mkd

01

00

01.

000.

5030

.10

68.4

00.

4611

6.75

11M

adag

asca

rm

dg0.

0627

00

10

022

.00

26.0

01.

7050

.30

0.22

225.

6334

Mal

awi

mw

i0.

6224

10

00

031

.50

27.6

016

.20

24.7

00.

1478

5.06

79M

alay

sia

mys

0.61

041

00

00

1.40

2.80

49.4

046

.40

0.02

567.

4685

Mal

dive

sm

dv0.

0333

10

00

00.

000.

1099

.90

0.00

0.03

506.

5399

Mal

im

li0.

8086

00

10

00.

200.

7080

.00

19.1

00.

1889

5.25

71M

alta

mlt

0.10

330

01

00

0.50

97.3

00.

002.

200.

3944

8.18

21M

arsh

allI

slan

dsm

hl1

00

00

0.00

0.00

0.10

00M

artin

ique

mtq

0.00

000

01

00

2.20

95.5

00.

102.

200.

1600

7.98

17M

aurit

ania

mrt

0.27

000

01

00

0.00

0.30

99.4

00.

300.

2222

5.98

18M

aurit

ius

mus

0.70

850

01

00

0.90

31.2

016

.40

51.5

00.

2241

7.54

14M

ayot

tem

yt0

01

00

0.30

0.90

98.8

00.

000.

1389

Mex

ico

mex

0.17

410

01

00

1.20

94.7

00.

004.

100.

2556

7.70

09

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Mic

rone

sia,

Fed.

Sta

tes

fsm

10

00

049

.20

45.6

00.

005.

200.

0728

7.57

56M

oldo

vam

da0

10

00

0.00

0.00

0.00

100.

000.

5222

7.20

97M

onac

om

co0

01

00

4.60

90.7

00.

004.

700.

4827

Mon

golia

mng

0.07

370

10

00

0.00

0.00

1.40

98.6

00.

5111

6.94

17M

oroc

com

ar0.

3480

00

10

00.

000.

2099

.40

0.40

0.35

566.

6175

Moz

ambi

que

moz

0.78

630

01

00

6.80

31.4

013

.00

48.8

00.

2017

4.71

98M

yanm

arm

mr

0.38

400

10

00

3.20

0.90

3.60

92.3

00.

2444

Nam

ibia

nam

0.72

831

00

00

64.2

019

.10

0.00

16.7

00.

2444

7.45

53N

epal

npl

0.45

001

00

00

0.00

0.00

3.00

97.0

00.

3111

4.99

77N

ethe

rland

snl

d0.

0634

00

10

042

.40

42.6

01.

0014

.00

0.58

119.

3772

Net

herla

nds

Ant

illes

ant

0.13

890

01

00

9.20

87.2

00.

103.

500.

1350

8.70

41N

ewZe

alan

dnz

l0.

1476

10

00

037

.90

18.7

00.

0043

.40

0.45

568.

9693

New

Cal

edon

ianc

l0

01

00

18.1

072

.50

4.00

5.40

0.23

678.

6326

Nic

arag

uani

c0.

0992

00

10

04.

4094

.70

0.00

0.90

0.14

446.

3723

Nig

erne

r0.

7329

00

10

00.

000.

2087

.90

11.9

00.

1778

5.61

40N

iger

iang

a0.

8567

10

00

015

.80

12.1

045

.00

27.1

00.

1111

6.36

70N

orw

ayno

r0.

0699

00

00

197

.80

0.30

0.10

1.80

0.68

899.

6846

Om

anom

n0

01

00

0.10

0.10

98.9

00.

900.

2333

8.25

75Pa

kist

anpa

k0.

6216

10

00

00.

800.

5096

.80

1.90

0.33

335.

7316

Pana

ma

pan

0.19

080

01

00

5.20

85.0

04.

505.

300.

1000

7.50

04Pa

pua

New

Gui

nea

png

0.80

271

00

00

58.4

032

.80

0.00

8.80

0.06

676.

6082

Para

guay

pry

0.41

110

01

00

1.90

96.0

00.

002.

100.

2556

6.96

60Pe

rupe

r0.

4316

00

10

02.

7095

.10

0.00

2.20

0.11

117.

0173

Phi

lippi

nes

phl

0.72

380

01

00

3.80

84.1

04.

307.

800.

1444

6.36

57Po

land

pol

0.03

900

10

00

0.10

81.0

00.

0018

.90

0.57

787.

5977

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Portu

gal

prt

0.00

250

01

00

1.10

94.1

00.

004.

800.

4367

8.23

80P

uerto

Ric

opr

i0.

0267

00

10

05.

1091

.50

0.00

3.40

0.20

178.

2965

Qat

arqa

t0

01

00

0.90

1.20

92.4

05.

500.

2811

9.74

41R

euni

onre

u0

01

00

0.50

96.3

02.

201.

000.

2340

Rom

ania

rom

0.12

200

10

00

5.80

4.90

1.20

88.1

00.

5111

7.27

93R

ussi

anFe

dera

tion

rus

01

00

00.

001.

4011

.30

87.3

00.

6667

8.07

05R

wan

darw

a0.

0609

00

10

011

.60

55.6

08.

6024

.20

0.02

225.

3901

Sal

vado

r,E

lsl

v0.

0514

00

10

02.

4096

.20

0.00

1.40

0.15

006.

6524

Sao

Tom

ean

dP

rinci

pest

p0.

0000

00

10

02.

2092

.40

0.00

5.40

0.01

115.

9841

Sau

diA

rabi

asa

u1

00

00

0.10

0.10

98.8

01.

000.

2778

9.10

06S

eneg

alse

n0.

7789

00

10

00.

105.

6091

.00

3.30

0.15

566.

1754

Sey

chel

les

syc

0.00

000

01

00

1.10

89.3

00.

309.

300.

0483

7.94

20S

ierr

aLe

one

sle

0.81

301

00

00

4.80

2.20

39.4

053

.60

0.09

225.

5518

Sin

gapo

resg

p0.

3215

10

00

02.

604.

7017

.40

75.3

00.

0136

9.02

33S

lova

kR

epub

licsv

k0

10

00

8.40

74.0

00.

0017

.60

0.53

787.

9918

Slo

veni

asv

n0

10

00

0.00

71.4

01.

5027

.10

0.51

118.

8777

Sol

omon

Isla

ndsl

b0.

5714

10

00

039

.80

19.1

00.

0041

.10

0.08

896.

3531

Som

alia

som

0.07

911

00

00

0.00

0.00

99.8

00.

200.

1111

4.64

71S

outh

Afri

caza

f0.

8310

10

00

039

.00

10.4

01.

3049

.30

0.32

227.

6137

Spa

ines

p0.

2745

00

10

00.

1096

.90

0.00

3.00

0.44

448.

7537

Sri

Lank

alk

a0.

3257

10

00

00.

406.

807.

2085

.60

0.07

785.

9197

St.

Kitt

san

dN

evis

kna

0.00

001

00

00

52.0

08.

200.

0039

.80

0.19

118.

0191

St.

Luci

alc

a0.

5833

10

00

06.

3088

.30

0.00

5.40

0.15

037.

9153

St.

Vinc

entA

ntill

esvc

t0.

0000

10

00

040

.70

19.4

00.

0039

.90

0.14

616.

9234

Sud

ansd

n0.

5122

10

00

00.

104.

4073

.00

22.5

00.

1667

5.89

57

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Sur

inam

esu

r0.

7500

00

10

036

.60

36.0

013

.00

14.4

00.

0444

7.50

38S

waz

iland

swz

0.00

001

00

00

33.9

010

.80

0.10

55.2

00.

2922

6.68

70S

wed

ensw

e0.

0650

00

00

168

.40

1.40

0.10

30.1

00.

6889

9.60

34S

witz

erla

ndch

e0.

3076

00

01

043

.20

52.8

00.

303.

700.

5222

9.86

67S

yria

nA

rab

Rep

ublic

syr

0.09

480

01

00

0.20

1.30

89.6

08.

900.

3889

7.01

88Ta

iwan

tai

0.25

510

00

10

3.00

1.50

0.50

95.0

00.

2589

8.60

52Ta

jikis

tan

tjk0

10

00

0.00

0.00

85.0

015

.00

0.43

336.

4547

Tanz

ania

tza

0.89

021

00

00

11.2

028

.20

32.5

028

.10

0.06

675.

1980

Thai

land

tha

0.35

691

00

00

0.20

0.40

3.90

95.5

00.

1667

6.86

97To

gotg

o0.

7285

00

10

06.

1029

.30

17.0

047

.60

0.08

895.

7328

Tong

ato

n0.

0000

10

00

061

.90

17.9

00.

0020

.20

0.22

227.

1199

Trin

idad

and

Toba

gotto

0.23

131

00

00

13.2

035

.80

6.50

44.5

00.

1222

8.21

23Tu

nisi

atu

n0.

0703

00

10

00.

000.

1099

.40

0.50

0.37

787.

0194

Turk

eytu

r0.

1636

00

10

00.

000.

1099

.20

0.70

0.43

337.

3620

Turk

men

ista

ntk

m0

10

00

0.00

0.00

87.0

013

.00

0.44

447.

0838

Uga

nda

uga

0.83

581

00

00

1.90

49.6

06.

6041

.90

0.01

115.

6250

Ukr

aine

ukr

01

00

00.

000.

000.

0010

0.00

0.54

447.

7826

Uni

ted

Sta

tes

ofA

mer

ica

usa

0.20

901

00

00

43.6

030

.00

0.80

25.6

00.

4222

9.61

80U

nite

dA

rab

Em

irate

sar

e0.

0000

10

00

00.

300.

4094

.90

4.40

0.26

679.

9490

Uni

ted

Kin

gdom

gbr

0.10

631

00

00

16.1

013

.10

1.40

69.4

00.

6000

9.16

54U

rugu

ayur

y0.

0667

00

10

01.

9059

.50

0.00

38.6

00.

3667

7.73

73U

zbek

ista

nuz

b0

10

00

0.00

0.00

88.0

012

.00

0.45

566.

9233

Vanu

atu

vut

0.54

411

00

00

54.6

016

.90

0.00

28.5

00.

1778

6.97

03Ve

nezu

ela

ven

0.05

250

01

00

1.00

94.8

00.

004.

200.

0889

8.03

99Vi

etna

mvn

m0.

1176

01

00

00.

203.

901.

0094

.90

0.17

785.

3148

Con

tinue

d


App

endi

xB

Con

tinue

d

Cou

ntry

Cod

eE

thno

lig.

Rel

igio

nLa

titud

eLo

gG

NP

Fra

ctio

n.Le

galo

rigin

(per

cent

ofpo

pula

tion)

per

capi

ta

Eng

lish

Soc

ialis

tFr

ench

Ger

man

Sca

ndin

.P

rote

stan

tC

atho

licM

uslim

Oth

erde

n.

Virg

inIs

land

svi

r1

00

00

43.0

033

.60

0.00

23.4

00.

2022

Wes

tern

Sam

oaw

sm0.

0000

10

00

076

.30

21.3

00.

002.

400.

1483

6.76

01Ye

men

Rep

ublic

bye

m0.

0122

00

10

00.

100.

0099

.50

0.40

0.16

675.

6168

Zaire

zar

0.87

230

01

00

29.0

048

.40

1.40

21.2

00.

0000

5.79

21Za

mbi

azm

b0.

8294

10

00

031

.90

26.2

00.

3041

.60

0.16

676.

1321

Zim

babw

ezw

e0.

5986

10

00

021

.40

14.4

00.

9063

.30

0.22

226.

4040

a Eth

nolin

guis

ticfra

ctio

naliz

atio

nfo

rGer

man

yis

the

inde

xca

lcul

ated

fort

hefo

rmer

Wes

tGer

man

y.b

Eth

nolin

guis

ticfra

ctio

naliz

atio

nfo

rthe

Rep

ublic

ofYe

men

isth

eav

erag

eof

the

form

erN

orth

and

Sou

thYe

men

.


ReferencesAlesina, Alberto, Reza Baqir, and William Easterly. 1999. “Public Goods and Ethnic Divisions,”

114Quarterly Journal of Economics.Banfield, Edward. 1958.The Moral Basis of a Backward Society. New York: Free Press.Barraclough, Geoffrey. 1972.The Medieval Papacy. New York: Harcourt, Brace and World.Barrett, David B., ed. 1982.World Christian Encyclopedia: A Comparative Study of Churches and

Religions in the Modern World, AD 1900–2000. New York: Oxford University Press.Barro, Robert. 1991. “Economic Growth in a Cross-Section of Countries,” 106Quarterly Journal

of Economics407–443.. 1996a. “Democracy and Growth,” 1Journal of Economic Growth1–27.. 1996b. “Determinants of Economic Growth: A Cross-Country Empirical Study,” Working

Paper Series 5698, National Bureau of Economic Research., and Jong-Wha Lee. 1994. Unpublished dataset for a panel of 138 countries. Harvard

University.Bates, Robert. 1981.Markets and States in Tropical Africa. Berkeley: University of California

Press.Beasley, William. 1972.The Meiji Restoration. Palo Alto, CA: Stanford University Press.Becker, Gary. 1983. “A Theory of Competition Among Pressure Groups for Political Influence,”

98Quarterly Journal of Economics371–400.Boycko, Maxim, Andrei Shleifer, and Robert W. Vishny. 1995.Privatizing Russia. Cambridge:

MIT Press.. 1996. “A Theory of Privatization,” 106Economic Journal309–319.

Brewer, John. 1988.The Sinews of Power. New York: Knopf.Bruk, S. I., and V. S. Apenchenko, eds. in chief. 1964.Atlas Narodov Mira. Moscow: Miklukho-

Maklai Ethnological Institute at the Department of Geodesy and Cartography of the StateGeological Committee of the Soviet Union, USSR Academy of Sciences.

BERI (Business Environmental Risk Intelligence), Center for Institutional Reform and the InformalSector (IRIS). 1995.BERI’s Operations Risk Index. College Park: IRIS, University of Maryland.

Central Intelligence Agency. 1996.CIA World Factbook(published online).Coleman, James. 1990.Foundations of Social Theory. Cambridge: Harvard University Press.David, Rene, and John Brierley. 1978.Major Legal Systems in the World Today. New York: Free

Press.DeLong, Bradford, and Andrei Shleifer. 1993. “Princes and Merchants: Government and City

Growth Before the Industrial Revolution,” 36Journal of Law and Economics671–702.Demsetz, Harold. 1967. “Toward a Theory of Property Rights,” 57American Economic Review

Papers and Proceedings347–359.De Toqueville, Alexis. [1858] 1955.The Old Regime and the French Revolution. New York:

Doubleday.Easterly, William, and Ross Levine. 1997. “Africa’s Growth Tragedy: Policies and Ethnic

Divisions,” 112Quarterly Journal of Economics1203–1250.Elster, Jon, Claus Offe, and Ulrich Press. 1998.Institutional Design in Post-Communist Societies.

Cambridge: Cambridge University Press.Ertman, Thomas. 1997.Birth of the Leviathan. Cambridge: Cambridge University Press.Finer, Samuel. 1997.The History of Government, Vol. I–III. Cambridge: Cambridge University

Press.Freedom House. 1996.World Survey of Economic Freedom 1995–1996: A Freedom House Study.

New Brunswick, NJ: Transaction Publishers.. 1996.Freedom in the World: The Annual Survey of Political Rights and Civil Liberties

1995–1996. New Brunswick, NJ: Freedom House.Fukuyama, Francis. 1995.Trust. New York: Free Press.Grossman, Sanford, and Oliver Hart. 1986. “The Costs and Benefits of Ownership: a Theory of

Vertical and Lateral Integration,” 94Journal of Political Economy691–719.Gunnemark, Erik V. 1991.Countries, Peoples, and Their Languages: The Linguistic Handbook.

Gothenburg, Sweden: Lanstryckeriet.Gwartney, James, Robert Lawson, and Walter Block. 1996.Economic Freedom of the World,


1975–1995. Vancouver: The Fraser Institute.Hall, Robert, and Charles Jones. 1999. “Fundamental Determinants of Output per Worker Across

Countries,” forthcoming inQuarterly Journal of Economics.Hayek, Friedrich. 1944.The Road to Serfdom. London: G. Routledge and Sons.Holmes, Kim R., Bryan T. Johnson, and Melanie Kirkpatrick. 1997.1997 Index of Economic

Freedom. Washington, D.C.: The Heritage Foundation.Huntington, Samuel. 1968.Political Order in Changing Societies. New Haven: Yale University

Press.. 1991.The Third Wave. Norman: University of Oklahoma Press.

Jaggers, Keith, and Ted Robert Gurr. 1996.Polity III: Regime Change and Political Authority,1800–1994[computer file]. Ann Arbor: Inter-university Consortium for Political and SocialResearch [distributor].

Johnson, Simon, Daniel Kaufmann, and Andrei Shleifer. 1997. “The Unofficial Economy inTransition,” 2Brookings Papers on Economic Activity159–240.

Johnson, Stuart. 1975.Frederick the Great and His Officials. New Haven: Yale University Press.Jones, Eric. 1981.The European Miracle. Cambridge: Cambridge University Press.Kamen, Henry. 1997.The Spanish Inquisition. New Haven: Yale University Press.Knack, Stephen, and Philip Keefer. 1995. “Institutions and Economic Performance: Cross-country

Tests Using Alternative Institutional Measures,” 7Economics and Politics207–227.. 1997. “Does Social Capital Have an Economic Payoff? A Cross-country Investigation,”

112Quarterly Journal of Economics1251–1288.Landes, David. 1998.The Wealth and Poverty of Nations. New York: W. W. Norton.La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny. (1997a).

“Legal Determinants of External Finance,” 52Journal of Finance1131–1150.. (1997b). “Trust in Large Organizations,” 87American Economic Review Papers and

Proceedings333–338.. 1998. “Law and Finance,” 106Journal of Political Economy1113–1155.

Lindbeck, Assar. 1997. “The Swedish Experiment,” 35Journal of Economic Literature1273–1319.Mack Smith, Denis. 1997.Modern Italy: a Political History. Ann Arbor: University of Michigan

Press.Marx, Karl. 1974 [1872].Das Kapital. London: Lawrence and Wishart.Mauro, Paolo. 1995. “Corruption and Growth,” 110Quarterly Journal of Economics681–712.Montesquieu, Charles de Secondat. 1748.The Spirit of the Laws. Paris.Muller, Siegfried H. 1964.The World’s Living Languages: Basic Facts of Their Structure, Kinship,

Location, and Number of Speakers. New York: Ungar.North, Douglass. 1981.Growth and Structural Change. New York: W. W. Norton.

. 1990. Institutions, Institutional Change, and Economic Performance. Cambridge:Cambridge University Press.

Olson, Mancur. 1965.The Logic of Collective Action. Cambridge: Harvard University Press.. 1982.The Rise and Decline of Nations. New Haven: Yale University Press.. 1993. “Dictatorship, Democracy, and Development,” 87American Political Science Review

567–576.. 1996. “Big Bills Left on the Sidewalk: Why Some Nations are Rich, and Others Poor,”

10Journal of Economic Perspectives3–24.Pipes, Richard. 1974.Russia under the Old Regime. New York: Charles Scribner’s Sons.Political Risk Services.International Country Risk Guide. East Syracuse, NY: Political Risk

Services, Institutional Reform and Informational Sector, various years.Putnam, Robert. 1993.Making Democracy Work: Civic Traditions in Modern Italy. Princeton:

Princeton University Press.Rauch, James. 1995. “Bureaucracy, Infrastructure, and Economic Growth: Evidence from U.S.

Cities During the Progressive Era,” 85American Economic Review968–979., and Peter Evans. 1997. “Bureaucratic Structure and Bureaucratic Performance in Less

Developed Countries,” mimeo, University of California, San Diego.Roberts, Janet. 1962. “Sociocultural Change and Communication Problems,” in Frank A. Rice, ed.,

Study of the Role of Second Languages in Asia, Africa, and Latin America. Washington, D.C.:


Center for Applied Linguistics of the Modern Language Association of America, 105–123.Schiavo-Campo, Salvatore, Giulio de Tommaso, and Amitabha Mukherjee. 1997. “An International

Statistical Survey of Government Employment and Wages,” inGovernment Employment andPay: A Global and Regional Perspective Series, Public Sector Management and InformationTechnology Team, Technical Department for Europe, Central Asia, Middle East and NorthAfrica, World Bank.

Shleifer, Andrei, and Robert W. Vishny. 1993. “Corruption,” 108Quarterly Journal of Economics599–617.

. 1994. “Politicians and Firms,” 109Quarterly Journal of Economics995–1025.

. 1998.The Grabbing Hand: Government Pathologies and their Cures. Cambridge: HarvardUniversity Press.

Smith, Adam. 1976, [1776].An Inquiry into the Nature and Causes of the Wealth of Nations.Chicago: University of Chicago Press.

Statistical Abstract of the World. 1995. New York: Gale Research, Inc.Tilly, Charles. 1990.Coercion, Capital, and European States. Berkeley: University of California

Press.Treisman, Daniel. 1997. “The Causes of Corruption: a Cross-National Study,” mimeo, UCLA.United Nations. 1995.Demographic Yearbook. New York: Department of Economic and Social

Affairs, Statistical Office, United Nations.Weber, Max. 1958.The Protestant Ethic and the Spirit of Capitalism. New York: Charles Scribner’s

Sons.Weingast, Barry. 1995. “The Economic Role of Political Institutions: Market-Preserving

Federalism and Economic Development,” 11Journal of Law, Economics & Organization1–31.

World Bank. 1995.Bureaucrats in Business. Oxford: Oxford University Press.. 1997.World Development Indicators 1997[CD-ROM]. Washington, D.C.: World Bank.

World Economic Forum. 1996.The Global Competitiveness Report 1996. Geneva: World EconomicForum.

Worldmark Encyclopedia of the Nations, 8th ed. 1995. Detroit: Gale Research.

The Quality of Government - scholar.harvard.edu · The Quality of Government ... effective...

Documents

Transcript of The Quality of Government - scholar.harvard.edu · The Quality of Government ... effective...