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Markets, Governance, and Institutions in the Process of Economic Development$
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Ajit Mishra and Tridip Ray

Print publication date: 2017

Print ISBN-13: 9780198812555

Published to Oxford Scholarship Online: December 2017

DOI: 10.1093/oso/9780198812555.001.0001

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On Quality Traps and Economic Development

On Quality Traps and Economic Development

(p.159) 10 On Quality Traps and Economic Development
Markets, Governance, and Institutions in the Process of Economic Development

Patrick M. Emerson

Oxford University Press

This chapter considers the interdependence among the quality levels of government institutions. Citizens of democratic societies are consumers of institutional output and the quality they demand from individual institutions is posited to be a function of the joint quality of all institutional output. Specifically, the quality of institutions is hypothesized to enter into consumers’ preferences in a supermodular fashion. An implication of this is that citizens will tend to desire institutions of the same quality; thus resource constrained democratic governments will tend to match the quality level of their complementary institutions. The Nash equilibrium concept is employed to show that multiple equilibria will result, and that a stable equilibrium exists at a low level of quality.

Keywords:   quality, complementarity, supermodularity, underdevelopment, multiple equilibria

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