2021 (18), №2

Measuring institutions: What is behind this?

For citation: 

Tambovtsev, V. L. (2021). Measuring institutions: What is behind this? Zhurnal Economicheskoj Teorii [Russian Journal of Economic Theory], 18(2), 197-211. https://doi.org/10.31063/2073-6517/2021.18-2.3


Measurement is an important part of economic research. Economic and other institutions are among the most significant factors affecting economy at macro- and micro-levels. Still no consensus has been reached, however, regarding their adequate measurement. This article puts forward a theoretical model for measuring institutions; it also compares the existing approaches to such measurement and the corresponding methodologies. The proposed theoretical model is based on the new institutional economics and representative measurement theory. The model contains a typology of attributes that can be measured in a variety of institutions and describes possible scales of measurement. The analysis focuses on the two main approaches to measuring institutions: (a) measuring the properties of individual institutions and (b) measuring the quality of the institutional environment of national economies. Within the second approach, two groups of measurement methods are identified and described: multidimensional and one-dimensional. The conclusion is made that most of the existing approaches to measuring institutions have not found their practical applications yet, and some of the approaches described in research literature fail to ensure valid measurements. Prospects for further research in this area are discussed.

PDF full
Downloaded: 8

Vitaly L. Tambovtsev — Doctor of Economics, Professor, Leading Researcher, Laboratory for Institutional Analysis of Faculty of Economics, Lomonosov Moscow State University (Moscow, Russian Federation; e-mail: tambovtsev@econ.msu.ru).

Volchik, V. V., & Berezhnoy, I. V. (2007). Gruppy interesov i kachestvo ekonomicheskikh institutov [Interest groups and economic institutions quality].  Ekonomicheskiy vestnik Rostovskogo gosudarstvennogo universiteta [TERRA ECONOMICUS], 5(2),  57–66. (In Russ.)

Morozova, T. V., & Kozyreva, G. B. (2015). Kachestvo institutsional’noy sredy sel’skikh territoriy Rossii [Quality of institutional environment of Russian rural territories].  Sever i rynok: formirovanie ekonomicheskogo poryadka [North and market: formation of economic order],1, 1 (44),  83–93. (In Russ.)

Podshivalova, M. V. (2019). Ekonomiko-matematicheskaya model’ institutsional’nogo optsiona kak novyy podkhod k otsenke kachestva institutov [Economic-mathematical model of the institutional option as a new approach to the institutions quality assessment].  Vestnik Yuzhno-Ural’skogo gosudarstvennogo universiteta. Seriya «Ekonomika i menedzhment» [Bulletin of the South Ural State University. Ser. Economics and Management], 13(2),  63–69. (In Russ.)

Tambovtsev, V. L. (2004). O raznoobrazii form opisaniya institutov [Variety of descriptive forms of institutions].  Obshchestvennye nauki i sovremennost’ [Social Sciences and Contemporary World], 2,  107–118. (In Russ.)

Tambovtsev, V. L. (2019). Upravlenie bez izmereniy [Management without measurement].  Terra Economicus [Terra Economicus], 17(3),  6–29. DOI: 10.23683/2073–6606–2019–17–3-6–29. (In Russ.)

Tambovtsev, V. L. (2001). Ekonomicheskiy analiz effektivnosti normativnykh aktov [An Economic Analysis of the Effectiveness of regulations].  Ekonomicheskiy analiz normativnykh aktov [An Economic analysis of regulations].  In Tambovtsev V. L. (Eds.). Moscow, Russia: TEIS, 33–49. (In Russ.)

Tambovtsev, V. L. (2021). Vozmozhna li edinaya institutsional’naya ekonomicheskaya teoriya? [Is unified institutional economics possible?].  Voprosy ekonomiki [Voprosy Ekonomiki], 1,  33–51. DOI: https://doi.org/10.32609/0042-8736-2021-1-33-51 (In Russ.)

Tanenkova, E. N. (2020). Vozmozhnosti izmereniya institutov i institutsional’nykh izmeneniy v sovremennoy ekonomicheskoy nauke [The opportunities of measurement of institutions and institutional changes in modern economic science].  Vestnik Omskogo universiteta. Seriya «Ekonomika» [Herald of Omsk University. Series “Economics”], 18(1),  45–56. DOI: 10.24147/1812–3988.2020.18(1).45–56. (In Russ.)

Alonso, J. A., & Garcimartín, C. (2013). The determinants of institutional quality. More on the debate.  Journal of International Development, 25(2),  206–226.

Aron, J. (2000). Growth and Institutions: A Review of the Evidence.  World Bank Research Observer, 15(1),  99–135.

Arruñada, B. (2007). Pitfalls to avoid when measuring institutions: Is Doing Business damaging business?  Journal of Comparative Economics, 35(4),  729–747.

Arruñada, B. (2009). How doing business jeopardises institutional reform.  European Business Organization Law Review, 10(4),  555–574.

Balcerzak, A. P. (2020). Quality of Institutions in the European Union countries: Application of TOPSIS Based on Entropy Measure for Objective Weighting.  Acta Polytechnica Hungarica, 17(1),  101–122. DOI:10.12700/APH.17.1.2020.1.6.

Balliew, S., Mathews, T., & Hall, J. C. (2020). Measuring economic freedom: an alternative functional specification and subsequent ranking.  Applied Economics, 52(14),  1582–1591.DOI: https://doi.org/10.1080/00036846.2019.1676874

Bargh, J. A., Schwader, K. L., Hailey, S. E., Dyer, R. L., & Boothby, E. J. (2012). Automaticity in social-cognitive processes.  Trends in Cognitive Sciences, 16(12),  593–605. DOI: https://doi.org/10.1016/j.tics.2012.10.002

Berggren, N. (2003). The Benefits of Economic Freedom: A Survey.  Independent Review, 8(2),  193–211.

Bitektine, A., & Haack, P. (2015). The “macro” and the “micro” of legitimacy: Toward a multilevel theory of the legitimacy process.  Academy of Management Review, 40(1),  49–75. DOI:10.5465/amr.2013.0318.

Blake, C., & Martin, C. (2006). The Dynamics of Political Corruption: Re-examining the Influence of Democracy.  Democratization, 13(1),  1–14. DOI: https://doi.org/10.1080/13510340500378191

Booysen, F. (2002). An Overview and Evaluation of Composite Indices of Development.  Social Indicators Research, 59(2),  115–151.

Cepec, J., & Grajzl, P. (2019). Measuring the effectiveness of bankruptcy institutions: filtering failures in Slovenian financial reorganizations.  Journal of Institutional Economics, 15(3),  553–567.

Commander, S., & Nikoloski, Z. (2011). Institutions and economic performance: What can be explained?  Review of Economics and Institutions, 2(2).  DOI: http://dx.doi.org/10.5202/rei.v2i2.33

Davis, J. H., & Ruhe, J. A. (2003). Perceptions of country corruption: Antecedents and outcomes.  Journal of Business Ethics, 43(4),  275–288. DOI: https://doi.org/10.1023/A:1023038901080

Dialga, I. & Vallée, T. (2015). The index of economic freedom: Methodological matters.  LEMNA Working Paper EA 4272.  DOI:10.1108/SEF-07–2015–0181.

Dialga, I., & Giang, L. T. H. (2017). Highlighting Methodological Limitations in the Steps of Composite Indicators Construction.  Social Indicators Research, 131(2),  441–465. DOI: 10.1007/s11205–016–1263-z.

Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2002). The regulation of entry.  The Quarterly Journal of Economics, 117(1),  1–37.

Finch, D., Deephouse, D. & Varella, P. (2015). Examining an Individual’s Legitimacy Judgment Using the Value–Attitude System: The Role of Environmental and Economic Values and Source Credibility.  Journal of Business Ethics, 127(2),  265–281. DOI: 10.1007/s10551–013–2031–5.

Frericks, P, Höppner, J., & Och, R. (2018). The Difficulty of Measuring Institutions: A Methodological Approach to the Comparative Analysis of Institutions.  Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 137(3),  847–865.

Gastil, R. D. (1982).  Freedom in the World. Political rights and civil liberties.  Westport, Conn.: Greenwood, 379.

Gwartney, J., & Lawson, R. (2003). The concept and measurement of economic freedom.  European Journal of Political Economy, 19(3),  405–430.

Heckelman, J. C. (2000). Economic freedom and economic growth: A short-run causal investigation.  Journal of Applied Economics, 3(1),  71–91.

Heckelman, J. C., & Stroup, M. D. (2005). A comparison of aggregation methods for measures of economic freedom.  European Journal of Political Economy, 21(4),  953–966.

Hoti, S., & McAleer, M. (2004.) An empirical assessment of country risk ratings and associated models.  Journal of Economic Surveys, 18(4),  539–588.

Hwang, C. L. & Yoon, K. (1981).  Multiple Attribute Decision Making: Methods and Applications a State-of-the-Art Survey.  Heidelberg: Springer, 269. DOI: 10.1007/978–3-642–48318–9.

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues.  Hague Journal on the Rule of Law, 3(2),  220–246. DOI:10.1017/S1876404511200046.

Kumlin, S., & Rothstein, B. (2005). Making and Breaking Social Capital: The Impact of Welfare State Institutions.  Comparative Political Studies, 38(4),  339–365. DOI: https://doi.org/10.1177/0010414004273203

Kvist, J. (2011). One-Size-Fits-All? Measurement Issues in Medium-N Comparative Welfare State Analysis.  Qualitative & Multi-Method Research, 9(2),  20–25.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A. & Vishny, R. (1998). Law and Finance.  Journal of Political Economy, 106(6),  1113–1155. DOI: https://doi.org/10.1086/250042

Langbein, L., & Knack, S. (2010). The Worldwide Governance Indicators: Six, One, or None?  Journal of Development Studies, 46(2),  350–370. DOI: https://doi.org/10.1080/00220380902952399

Leeson, P. T. (2020). Economics is not statistics (and vice versa).  Journal of Institutional Economics, 16(4),  423–425. DOI: https://doi.org/10.1017/S174413742000003X

Mari, L. P. (2005). Models of the Measurement Process. In: Sydenham P. & Thorn R. (Eds.).  Handbook of Measuring System Design.  Chichester: John Wiley & Sons, 681–684.

Marshall, M. G., Gurr, T. R., Davenport, C., & Jaggers, K. (2002). Polity IV, 1800–1999: Comments on Munck and Verkuilen.  Comparative Political Studies, 35(1),  40–45.

Ménard, C. (2020). Please, open the windows!  Journal of Institutional Economics, 16(4),  427–428. DOI:10.1017/S1744137420000089.

Ménard, C., & du Marais, B. (2008). Can we rank legal systems according to their economic efficiency?  Washington University Journal of Law & Policy, 26,  55–80.

Miłaszewicz, D., & Nermend, K. (2020). Application of Vector Measure Construction Methods to Estimate Quality of Institutions: Nations in Transition.  European Research Studies Journal, 23(2),  16–29. DOI:10.35808/ersj/1805.

Miller, A. S., & Mitamura, T. (2003). Are Surveys on Trust Trustworthy?  Social Psychology Quarterly, 66(1),  62–70. DOI: https://doi.org/10.2307/3090141

Murphy, R. H. (2020). Economics is whatever the comparative advantage of economists is: a comment on Leeson (2020).  Journal of Institutional Economics, 16(4),  553–556.

Nardulli, P. F., Peyton, B., & Bajjalieh, J. (2013). Conceptualizing and measuring rule of law constructs, 1850–2010.  Journal of Law and Courts, 1(1),  139–192.

Nistotskaya, M. (2020). Quality of Government (QoG) as Impartiality: Review of the literature on the causes and consequences of QoG.  KIPA (KoreaInstitute of Public Administartion) Public Policy Review, 1(1),  25–49.

North, D. (1971). Institutional Change and Economic Growth.  The Journal of Economic History, 31(1),  118–125.

Porter, P. K., & Scully, G. W. (1987). Economic Efficiency in Cooperatives.  Journal of Law and Economics, 30(2),  489–512.

Rock, A. (2005).  The mind at night: The new science of how and why we dream.  Cambridge, MA: Basic Books.

Rothstein, B., & Stolle, D. (2008). The state and social capital: An institutional theory of generalized trust.  Comparative Politics, 40(4),  441–459.

Rothstein, B., & Teorell, J. (2008). What Is Quality of Government? A Theory of Impartial Political Institutions.  Governance, 21(2),  165–190.

Ruiz, F., Cabello, J. M., & Pérez-Gladish, B. (2018). Building Ease-of-Doing-Business synthetic indicators using a double reference point approach.  Technological Forecasting and Social Change, 131,  130–140.

Sala-i-Martin, X., Artadi, E. V. et al. (2008). The Global Competitiveness Index: Prioritizing the Economic Policy Agenda.  The Global Competitiveness Report 2008–2009,  3–41.

Scully, G. W. (1988). The Institutional Framework and Economic Development.  Journal of Political Economy, 96(3),  652–662.

Shirley, M. M. (2020). How should economists analyze institutions? Comments on David Skarbek, ‘Qualitative research methods for institutional analysis’.  Journal of Institutional Economics, 16(4),  429–431. DOI:10.1017/S1744137420000053.

Skarbek, D. (2020). Qualitative Research Methods for Institutional Analysis.  Journal of Institutional Economics, 16(4),  409–422.

Smith, G. T. (2005). On Construct Validity: Issues of Method and Measurement.  Psychological Assessment, 17(4),  396–408. DOI: https://doi.org/10.1037/1040-3590.17.4.396

Sturgis, P., & Smith, P. (2010). Assessing the Validity of Generalized Trust Questions: What Kind of Trust are we Measuring?  International Journal of Public Opinion Research, 22(1),  74–92. DOI:10.1093/ijpor/edq003.

Sturm, J.-E., Leertouwer, E., & de Haan, J. (2002). Which economic freedoms contribute to growth? A comment.  Kyklos, 55(3),  403–416.

Tabellini, G. (2010). Culture and Institutions: Economic Development in the Regions of Europe.  Journal of the European Economic Association, 8(4),  677–716.

Teorell, J. (2009). The Impact of Quality of Government as Impartiality: Theory and Evidence. University of Gothenburg.  QoG Working Paper Series 2009: 25.

Thomas, M. A. (2010). What do the worldwide governance indicators measure?  The European Journal of Development Research, 22(1),  31–54. DOI: https://doi.org/10.1057/ejdr.2009.32

Tost, L. P. (2011). An integrative model of legitimacy judgments.  Academy of Management Review, 36(4),  686–710. DOI: 10.5465/amr.2011.65554690.

Voigt, S. (2013). How (not) to measure institutions.  Journal of Institutional Economics, 9(1),  1–26. DOI: 10.1017/S1744137412000148.

Voigt, S. (2018). How to measure informal institutions.  Journal of Institutional Economics, 14(1),  1–22. DOI: https://doi.org/10.1017/S1744137417000248

Williamson, C. R. (2009). Informal institutions rule: Institutional arrangements and economic performance.  Public Choice, 139(3),  371–387.