The Best Laid Plans: The Impact of Informal Rules on Formal Institutions in Transitional Regimes

Abstract

How do informal institutions influence the formation and function of formal institutions? Existing typologies focus on the interaction of informal institutions with an established framework of formal rules that is taken for granted. In transitional settings, such typologies are less helpful, since many formal institutions are in a state of flux. Instead, using examples drawn from postcommunist state development, I argue that informal institutions can replace, undermine, and reinforce formal institutions irrespective of the latter's strength, and that the elite competition generated by informal rules further influences which of these interactions dominate the development of the institutional framework. In transitional settings, the emergence and effectiveness of many formal institutions is endogenous to the informal institutions themselves.How do informal institutions influence the emergence and function of formal institutions? Further, how do we account for the variation in formal institutions of the market, state, and democracy in post-communist countries? Post-communist democracies show surprising variation in the emergence and enforcement of their formal market and state institutions, which cannot be easily explained by historical legacies, formal institutional deficits, or external influence alone. The development of these post-communist formal rules demonstrates the mechanisms of informal influence on the emergence and transformation of formal institutions. This influence is direct: informal institutions serve as templates and substitutes for formal choices. Even as they compensate for formal institutions, informal rules can subvert them. Informal institutions also reify formal rules by defining and expanding their domain, and by providing incentives and information to follow formal institutions. The effect is also indirect: informal institutions shape elite competition and cooperation, which St Comp Int Dev (2010) 45:311-333

Conceptualizing the Co-Existence of Formal and Informal Institutions Within Planning

“…The foregoing discussion, concerned with how formal and informal institutions interact in planning, has put forward several arguments. One argument concerns a 'mutual shaping' that has been evident in the Nicosia case and points to the deficiencies of largely depending on formal institutions [see, [16][17][18][19][20][21][22][23]. How informal institutions have their effects or shape the interaction?…”

“…A new insight is added which states that formal and informal institutions influence each other. in East Central Europe's planning context [20], the interaction of formal and informal institutions reveals that this interaction has its impact on the types of formal institutions that accentuate and also on what kinds of informal institutions are sustained. In China [24], new informal institutions emerge as a result to formal institutions while being key to 'endogenous' institutional change.…”

“…Another example, informal institutions are seen from the perspective of being able to compete with, exist in parallel to, or to coordinate formal institutions [19]. A further example is transitional regimes of Eastern Central Europe where informal institutions could replace, undermine, support, or strengthen formal institutions irrespective of strength of the formal institutions they co-exist with [20]. How informal institutions act in completing, complementing, coordinating or distorting ways is yet unclear.…”

“…Institutions evolve differently from one part of the world to another. Therefore, scholars (for examples, [19,20,22,23]) investigate the emergence and adaptation of informal institutions in divergent contexts, looking at the reasons for change, different interactions and outcomes in varying contexts. Important gaps in knowledge thus emerge in this respect.…”

Media Capture in Post-Communist Ukraine

“…some of these concepts-such as clientelism, neopatrimonialism, state capture, corruption, and informal institutions-offer means to understand the informal order that coexists in these societies alongside the rules and institutions of the market and democracy but often interferes with their maintenance and consolidation. this informal order is sometimes defined as corruption (Holmes 2006;Mungiu-Pippidi 2006): not in the sense of petty corruption, which exists everywhere to some degree, but of high-level political corruption under which the state falls into the hands of "incumbent elites" who "capture private benefits from the public offices they hold" (Grzymala-busse 2008). according to the theory, captured states can differ in the level of appropriation of state capacities by incumbents.…”