A Cross-Country Analysis of Institutions and Performance
Our analysis in the two previous chapters shows that our model of institution–performance interaction, cast within a simultaneous equation framework, is resilient and its empirical results in different estimation contexts are robust and reliable. The analytical and empirical strength of our approach allows us to take the analysis to its next logical level, which is still more insightful from both theoretical and policy perspectives. The initial focus of our analysis was mainly on the relative role and significance of institutional aspects, based on their local effects within a given equation. Attention then shifted to the formalization of various layers of institution–performance linkages, utilizing the relationship among variables across equations within the simultaneous system framework. The evaluation of the local effects of institutional variables within different equations and the strength of institutional intra- and interlinkages provides a basis for understanding the systemwide institutional and performance impacts of a marginal change associated with a variable in any given equation within the system. This chapter attempts to evaluate the nature, pattern, and implications of such systemwide impacts initiated by local changes in the institutional variables and to address some key issues surrounding institutional design and reform implementation both in general and in water sector contexts. With the quantification of different layers of linkages among institutional and performance variables, we can now trace quantitatively the multifarious routes through which the effects of a marginal change in an institutional variable are transmitted and reflected ultimately on water sector performance. By tracing all the...
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