Institutional Quality and Informal Economy Nexus in the Middle East and North Africa


Kırşanlı F.

in: Handbook of Informal Economy, Prof. Dr. Ceyhun Elgin, Editor, Routledge, London/New York , İstanbul, pp.1-13, 2024

  • Publication Type: Book Chapter / Chapter Research Book
  • Publication Date: 2024
  • Publisher: Routledge, London/New York 
  • City: İstanbul
  • Page Numbers: pp.1-13
  • Editors: Prof. Dr. Ceyhun Elgin, Editor
  • Yozgat Bozok University Affiliated: Yes

Abstract

North (1990) defines institutions as "the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction." Although there are various definitions of institutions and institutional quality, North’s pioneering analysis helps to explain how the notion of institutions characterizes human relations that underpin sustainable economic development. Moreover, these humanly devised constraints (i.e., quality of institutions) create a type of society that refrains from having a large informal economy. This paper analyzes the Middle East and North Africa (MENA) region's political economy to examine the key nexus between institutional quality and informal economy. Considering the broad scope of institutional quality and its determinants, the paper focuses on corruption, government effectiveness, regulatory quality, the rule of law, voice and accountability and political stability and the absence of violence. Furthermore, a larger informal sector, primarily the outcome of lower institutional quality in the MENA, is examined. Finally, the paper addresses several policy recommendations to eliminate the informal sector and increase the quality of institutions.