The Unassuming Economist

How does economic growth depend upon the nature of bureaucracy and the effectiveness of institutions in a nation?

Historically and empirically speaking, the two are often, if not always very strongly correlated.  Besides, evidence gathered by historians and political scientists also fuels the idea that establishing an effective bureaucracy has been vital to the development of modern nation-states, particularly around functions such as national defence.

In their column for VoxEU, economists Tim Besley, Robin Burgess, Adnan Khan, Jonathan Old and Guo Xu present a review of the literature to broaden the discussion on the role that political institutions play in economic progress. They study parameters like the use of incentives in improving performance, selection criteria used in recruitment, relationships between the politicians and bureaucrats, and the role of non state actors like civil society organisations and NGOs in this column.

Finally, they suggest the following three methods to transition from a micro perspective to a much broader one to study this aspect. a transition from the study of microeconomic phenomena towards understanding larger, more complex mechanisms is an important next step to fully grasp how effective bureaucracies support development.

• “First, gathering economy-wide micro-data to evaluate system-wide reforms would enable researchers to better study structural transformations.
• Second, understanding how politics and the bureaucracy interact to generate state capacity has largely been ignored, but seems important given the unavoidable interactions and interdependencies between the two.
• Third, the examples of structural transformation in China and East Asia show that studying the relationship between the private sector and bureaucracy requires closer attention. Whether bureaucracies can innovate and adapt to future challenges will have important economic implications”.

Click here to read the full article.