bureaucracy and growth - international studies...
TRANSCRIPT
1
Bureaucracy and Growth
: Revisiting Evans’ Effect of Weberian Bureaucracy on Economic Growth
Yeon Ho Lee
(Yonsei University)
Yeoun Ki
(Yonsei University)
I. Introduction
II. Literature Review
III. Research Design
IV. Results
V. Conclusion
VI. Bibliography
abstract
One of key features that have been drawing countries economic growth is said to lie in
its meritocratic bureaucracy. And this is said to be the main driving force of rapid
economic growth between 1970’s to 1990’s for East Asian countries that are called the
developmental state. With State holding strong autonomy, bureaucratic structure supported
and practically carried out goals set by State as an institution and administrative procedure
of drawing economic growth. Evans and Rauch(1999) tested the effect of meritocratic
bureaucracy on economic growth empirically and suggested the significant relations
between the two. However, considering today’s economic status, it is questionable that
whether the role of bureaucracy is significantly related to the economic growth. In this
article, by testing with new and current data for quality of bureaucracy and economic
growth, it tries to examine whether the strong and significant relations between
bureaucracy and growth are still meaningful. By adopting former works of Evans and
Rauch(1999), this article empirically tested the effect of meritocratic bureaucracy in
today’s economic growth.
2
I. Introduction
Is meritocratic bureaucracy important in pushing its economic growth rate? This debate
dates back to Weber’s theory on rationality of bureaucracy. And more recently this
meritocratic feature was suggested as a significant contributing factor in leading economic
development of developing countries. The cases of East Asian countries that are classified as
developmental state are strong examples that support such argument, especially during 1970
to 1990. Evans and Rauch(1999) tested such relevance empirically and proved its
correlations.
However, there are needs to look closely into the logic of meritocratic bureaucracy and its
impact on economic growth. Especially since 1997 Asian Financial crises, so-called
developmental states undertook several reforms on its state strategy on economic growth
towards regulatory model, and the developmental model seems only to work in East Asian
areas, whereas Latin American developmental state models have shown some disappointing
outcomes. And also, the economic shape is rapidly changing after 2008 economic crisis. With
this relevance, whether meritocratic bureaucracy still holds significance needs to be tested
with new circumstances taken into account.
On given circumstances, this article tries to empirically test whether meritocratic
bureaucracy is still important in today’s economic development across the countries. And to
do so, this tries to adopt former model of Evans and Rauch(1999) and the variable suggsted
by it to argue whether their logic is still significant in evaluating today’s economic
conditions. Using statistical data with linear regression, this article tries to verify the logics
supported by Evans and Rauch(1999), and moreover former works supported by
developmental state theorists.
To test empirically, the main variables that measures meritocratic feature of bureaucracy are
government’s former recruitment system which entails strict entrance examinations and
government’s reward on bureaucratic personnel within the system. The growth of economic
change is measured between 2008 to 2013 to see the most current situations and situations
after 2008 economic crisis.
II. Literature review
With the advent of so-called four East Asian Tiger’s rapid economic growth through state’s
holding strong autonomy in leading its economic growth. And the key element of these state’s
strong autonomy lies in its bureaucratic structure. Chalmer Johnson(1982) suggested the
concept of the “capitalist developmental state” to refer to the developmental state based on
institutional arrangements common to high growth in East Asian economies.
3
Of the characteristics of such developmental states, such as holding economic growth as the
first priority and absence of any commitment to equality, the most significant feature of states
holding strong autonomy lies in its bureaucratic structure. Under strong state autonomy, the
market is guided with instruments formulated by a small-scale, elite bureaucracy, recruited
from the best managerial talent availiable in the system. Within the bureaucracy, a pilot
agency play a key role in policy formulation and implementation. Close institutionalized
links are established between the lite bureaucracy and private business for consultation and
cooperation. The organizational and institutional links between the bureaucratic elites and
major private sector firms are crucial in generating a consensus on goals, as well as in
exchanging information, both of which constitute essential components of the process of
policy formulation and implementation. It is a political system where bureaucracy is given
sufficient scope to take initiatives and operate effectively. The politicians “reign” while the
bureaucracy “rule”(Onis,1991).
What upholds this developmental state model are one hand suggested by the term “state
autonomy” and on the other “bureaucracy” as an institutional setting. Behind this
developmental state model lies two types of human capital; elite politicians and elite
bureaucrats. The former organizes political institutions of developmental state strategy and
the latter organizes administrative and technical institutions of the developmental state. The
bureaucratic elites substantially and through policies propel the purposes set by political elites
which sets economic growth as a priority and insulates its priorities from socio-political
effects that may harm political agendas. From this perspective, it could be said that the role of
bureaucracy in accomplishing the purpose of developmental states accounts for significant
importance (Lee, 2016).
To analyze this bureaucratic structure in relationship with economic growth, Evans and
Rauch (1999) empirically tested the relationship between bureaucratic structure and
economic growth. In doing so, they established a term ‘Weberain scale’ to feature
bureaucratic proficiency. This ‘Weberian Scale’ reflects the ideas of bureaucracy suggested
by Weber that bureaucracy is a particular kind of organizational structure set in contrasts to
earlier patrimonial and prebendal forms of government administration. More precisely, the
public administrative organizations that are characterized by meritocratic recruitment and
predictable, long-term career rewards will be more effective at facilitating capitalist growth
than other forms of state organizations(Evans & Rauch, 1999).
Evans and Rauch established a new dataset concerning bureaucratic characteristics with
regards to whether each country’s bureaucracy follows the features suggested by Weberian
terms. They used data collected between 1993-1996 through expert survey questions to
illustrate 35 countries existing their bureaucratic characteristics. The dependent variable here
is the total growth of real GDP per capita during the 1970-1990 period. Results showed that
there is significant positive relations between Weberainness scale of bureaucracy and GDP
4
growth.
Figure 1
The effect of Weberianness Scale on Economic Growth(Evans&Rauch, 1999)
Evans and Rauch(1999) controlled for past average schooling years to control for the
possibility Weberianness could be a proxy for overall level of development stocks of human
capital and also controlled for initial GDP level. The relation between the Weberianness and
economic growth remained strong and significant. And the scattergram suggested another
significant feature that there is strong degree to which the regional distribution of Weberian
characteristics parallels regional differences in growth performance. Specially, the four cases
of East Asian countries which account for so-called East Asian Four Tigers epitomize, during
concerned period, both high growth and high Weberian bureaucratic traits.
However, this growth with bureaucratic structure was not without any sacrifices. Strong
state autonomy insulate outside influence that may erode its policy agenda. States, to
maintain its main driving force and attain strong autonomy, inevitably form a regime that
certain political elites dominates and that is isolated from any other social forces or pressures,
in turn it suggests the development of public goods and public wealth. Therefore, the civil
society is less likely to appear in such social conditions. And the major flaw led by this
developmental model is entailed by its ignorance towards distribution where the main focus
is paid upon development and growth. (Lee, 2009).
Political institutionalization theory, suggested by Huntington, addresses that ,at the early
5
stage of development, authorities should be centralized on the hand of modern elites in a way
that can control the mass public, which could be analyzed to pursue strong elitists
perspectives. This emphasis on central authority and institutionalization of such had
developed into a rationale that justifies authoritative regime in developing countries where
little infrastructure prevailed. And this was not the exception with East Asian developmental
states. Authoritative institutions generated backgrounds for political corruption that later
dismantled domestic political arena. And for most, this emphasis on state autonomy created
unequal access where capitals and firms are allowed to participate in the political process
whereas civil society is isolated from it(Lee, 2009).
Literatures have been published with regards to this state-led strategy that sets economic
growth as priority has generated consequences on democratic foundations.
Prezeworski(2000)suggested that the form of regime is not significantly related to its
economic growth through statistical analysis. Sirowy and Inkels(1990) suggested that there is
other variables that could contribute to economic growth other than the form of regime.
However, less attention has been shared with regards to Evans’s former argument with
regards to bureaucratic structure and economic growth. Libman(2012) suggested how the size
of bureaucracy is negatively associated with economic growth in the case of Russian regions.
And in doing so, Libman(2012) tested empirically with data that there is significant negative
relations between the two variables. This result suggests counter-wise as what Evans might
have suggested. But, even this lacks further development in analyzing how “Weberianness”
of bureaucratic features could contribute to economic growth after the Cold war era.
To test whether Evans’s argument is still adaptable after the cold war era, this article uses
cross-sectional data on bureaucratic professionalism to test its relevance with economic
growth. By narrowing the time span after 2008 economic crisis, this article tries to answer
whether the bureaucratic features are still relevant in state’s economic growth.
III. Research Designs
In this article, the main hypothesis to test is based upon Evans and Rauch(1999). With
regards to their work, it tries to test the hypothesis of whether bureaucratic features that could
be said to hold Weberianness have positive relation with economic growth rate.
Evans and Rauch(1999) addressed a basic equation of which standardized form is:
% Change in GDP per capita 1970-1990 = -0.317(real GDP per Capita 1965) +
0.307(average years of schooling 1965) + 0.615(Weberianness score) (1)
6
And through empirically testing this hypothetical theory that Evans and Rauch(1999)
suggested with new dataset comparable to that of what Evans and Rauch(1999) formally
used, this article tries to answer the question whether their argument is still adaptable today.
3.1 Hypothesis
According to Evans and Rauch(1999), Weberianness scale consists of mainly two parts.
First, Weberianness Scale concerns when public employee is hired, the weight is put on
education an formal entrance examination system. Second, predictable careers and long-term
employment are important for crating a working environment for bureaucracy where
meritocracy is rewarded.
Based on this two important features of Weberianness scale that Evans and Rauch(1999)
suggested, two hypotheses of this paper that relates bureaucratic characteristics to economic
growth arise.
Hypothesis 1: If the country is more likely to have meritocratic entrance examinations when
hiring its bureaucratic employees, it is more likely that it experiences higher growth
of GDP per capita.
(2)
Hypothesis 2: If the country is more likely to reward its bureaucrats with long-term
employment and predictable careers, it is more likely that it experiences higher
growth of GDP per capita.
(3)
3.2 Data
To test the two hypotheses, the source of data is QoG standard data published by QoG
Institute of University of Gothenburg is used. QoG’s cross-sectional data, published in 2017,
examines 194 countries and their quality of government. And the data for year of 2013 is
prioritized. Therefore, other control variables and dependent variables are extracted
concerning year of 2013.
For independent variable, two variables from QoG standard dataset is used for each
hypothesis 1 and hypothesis 2. Index of closedness(Closed Public Administration) and index
of professionalism(Professional Public Administration) are used respectively to test each
hypothesis. Index of closedness is relevant to whether specific government has formal
entrance examination institutionalized for hiring its personnel. Closedness index measures to
7
what extent th public administration is more closed or public-like, rather than open or private
like. On the other hand, index of professionalism is relevant to independent variable of
hypothesis 2, whether the country is more likely reward its bureaucratic personnel with
predictable careers. Both of indexes of closedness and professionalism reflect the mean value
of survey question
Table1.
Index for main independent variables and measurement
Index Measurement
Index of Closedness
1. Public sector employees are hired via formal examination system
2. Entry to the public sector is open only at the lowest level of the hierarchy
3. The terms of employment for public sector employees are regulated by special
laws that do not apply to private sector employees.
Index of
Professionalism
1. When recruiting public sector employees, the skills and merits of the applicants
decide who gets the job.
2. When recruiting public sector employees, the political connections of the
applicants decide who gets the job.
3. The top political leadership hires and fires senior public officials.
4. Senior public officials are recruited from within the ranks of the public sector.
Main dependent variable is, as suggested by Evans and Rauch(1999), the percentage of
change of GDP per capita in each country. To control the effects of 2008 economic crisis and
to reflect the most current status of economic growth, the dependent variable is extracted
from percentage of change in GDP per capita from 2008 to 2013. The source of data is World
Bank database.
% Change of GDP per capita (2008-2013)= [{(GDP per capita in 2013) – (GDP per capita
in 2008)}/(GDP per capita in 2008)] *100 (4)
Evans and Rauch(1999) controlled for former GDP per capita level to control the initial per
capita levels and initial human capital levels separately. The logic behind this is firstly
suggested by the fact that more highly developed bureaucracies are more likely to be found
among the developed countries. And also to avoid the criticism that Weberianness is simply a
proxy for overall level of development or existing stocks of human capital, they controlled
8
for the initial average level of schooling for each countries, which accounts for average
schooling years in the total population over 25. And both control variables are the score in
1965.
In this article, however, as an index of preexisting conditions of each economic background,
only GDP per capita of 2000 is controlled, of which source of data is World Bank Database.
Because of existing strong correlations between GDP per capita of 2000 and average years of
education in 2000 for each country, only GDP per capita is controlled for initial conditions.
Instead, to control for development of human capital alternative variable of average schooling
years, which accounts for the averages years schooling spent by populations over age of 25 in
2010 is controlled. Considering the time-scope of dependent variable from 2008-2013 and the
strong correlations between each initial conditions, average year of schooling in 2010 is more
adequate to control for the effects of development of human capital and change of GDP per
capita. And the data is extracted from Barro-Lee Data set which provide educational
attainment data for 146 countries.
And last control variable is the income level of each country. Instead of classifying countries
into regional distribution, by using cross-sectional data, this article tries to examine how
economic classes where countries are part of could affect the outcome of relationship
between bureaucracy and economic growth. Whereas Evans and Rauch(1999) only focused
on developing countries, the variable of high level income countries, upper middle level
income countries, lower middle level income and low income level countries are added as
dummy variable which are extracted from World Bank Database.
IV. Results
Through linear regression test, this article tries to analyze whether the Weberianness of
bureaucracy still is in significant and positive relations with economic growth, as Evans and
Rauch(1999) suggested. Through testing two hypotheses with empirical data, it tries to solve
whether the argument suggested by Evans and Rauch(1999) is still adoptable. The result of
the regression model is summarized in Table 2 and Table 3.
The first hypothesis that tries to verify the causal relationship between formal bureaucratic
entrance examination with economic growth is shown in model 1 to model 5. The variable
that showed constantly significant was the former economic conditions. This suggests that
countries where former GDP per capita level is high are associated with slow rate of
economic growth rate. As is expected by economic theories, where economic conditions are
high, it is highly likely that those countries are associated with slower growth rate.
The main independent variable, bureaucratic closedness, which indicates the level of
institutions that is prone to have formal recruitment system, is shown significantly negatively
9
correlated with the economic growth. This is partially different from what Evans and
Rauch(1999) suggested. Evans and Rauch(1999) suggested in their paper that their
Weberianness scale is conducted of importance of exams in recruiting civil servants to the
core economic agencies and more generally. The result of their works indicated that the
Weberianness in positive correlation with economic growth rate between 1970-1990.
Figure 2
Effect of bureaucratic closedness on % change of economic growth(2008-2013)
However, the result suggested opposite correlation from Evans and Rauch(1999) in this
paper. The higher the degree to which government depend on formal examination system to
recruit its personnel, the more likely it is faced with slower rate of economic growth. When
controlled for the level of income of country classified by World Bank dataset, to be more
specifically, this tendency showed constant significant relationship in ‘High income
countries’ and ‘Lower middle income countries’. The best example, as drawn in attached
scattergram, could be suggested by the case of France. In short, hypothesis 1 tuned out
negatively significant and this was true of countries that are classified as high income and
lower middle income.
Table 2
10
Linear regression result of bureaucratic closedness on % change of economic growth(2008-
2013)
model1 model2 model3 model4 model5
bureaucratic closedness
-1.938*
(0.0602)
-1.950*
(0.059)
-1.326
(0.1932)
-1.890*
(0.5515)
-1.465
(0.151)
bureaucratic
professionalism
Average year spent at
schooling(25+)
0.0937
(0.3549)
0.967
(0.340)
0.978
(0.335)
0.951
(0.348)
1.032
(0.308)
Former GDP per
capita(2007,$)
-4.778*
(0.000)
-2.553**
(0.015)
-5.430***
(0.000)
-3.698***
(0.000)
-4.414***
(0.000)
High income countries -0.904
(0.372)
Upper middle income
countries
-2.248**
(0.0308)
Lower middle income
countries
1.152
(0.137)
Low income countries 1.732*
(0.091)
Number of countries 38 37 37 37 37
Adjusted R-squared 0.3585 0.3553 0.4219 0.3805 0.3914
(* p<0.1, **p<0.05, *** p<0.001)
Hypothesis 2, which tries to clarify the existing correlation between ‘ If the country is more
likely to reward its bureaucrats with long-term employment and predictable careers, it is
more likely that it experiences higher growth of GDP per capita’ , is tested through separate
regression model, models from model 6 to model 10. The test on overall countries showed
statistically non-significant correlations between bureaucratic professionalism and change of
economic growth. Only former GDP per Capita level, as suggested by testing hypothesis1,
proved to be significant.
However, when controlled for the classified income level provided by World bank, one
group showed statistical significance that is relevant to Evans and Rauch(1999). Countries
that are classified as lower income group showed positive correlation between bureaucratic
professionalism and the degree of economic growth.
11
Table 2
Linear regression result of bureaucratic professionalism on % change of economic
growth(2008-2013)
(* p<0.1, **p<0.05, *** p<0.001)
Whereas Evans and Rauch(1999) only used data from so-called developing countries, this
article used cross-sectional data regardless of the stage of development. Additionally, World
Bank no longer classifies countries according to the stage of development that countries are
undergoing. To generalize Evans and Rauch(1999) and clarify wether it could be adopted in
today’s cross-sectional areas, this article tested two hypotheses that was suggested in Evans
and Rauch(1999) by using different data.
The results are partially contradicting and partially supporting Evans and Rauch(1999). For
model6 model7 model8 model9 model10
bureaucratic closedness
bureaucratic professionalism 1.601
(0.113)
1.979*
(0.051)
1.498
(0.138)
1.665**
(0.0998)
1.590
(0.1157)
Average year spent at
schooling(25+)
0.697
(0.487)
0.832
(0.4077)
0.675
(0.502)
0.718
(0.474)
0.708
(0.4812)
Former GDP per capita(2007,$) -4.084***
(0.000)
-1.366
(0.176)
-4.235***
(0.000)
-3.373***
(0.001)
-
3.773**
*
(0.000)
High income countries -2.541**
(0.013)
Upper middle income countries -1.194
(0.236)
Lower middle income countries 2.198**
(0.030)
Low income countries 1.065
(0.2901)
Number of countries 82 81 81 81 81
Adjusted R-squared 0.1707 0.223 0.175 0.2081 0.172
12
meritocratic recruitment of bureaucratic personnel, there exists negative correlations between
meritocratic recruitment and % of change in GDP per capita. This is proving hypothesis 1 in a
negative direction. And for hypothesis 2, there is no statistically significance between
bureaucratic professionalism and economic growth. Only for the case of lower income groups
are positively suggesting that bureaucratic professionalism accounts for growth rate. If it
could be argued that lower middle income countries are those countries that traditionally
classified as developing countries, Evans and Rauch(1999)’s argument could partially be
supported due to the findings.
V. Conclusion
Unlike former analysis on the relationship between economic growth and meritocratic
bureaucracy provided by Evans and Rauch(1999), this article finds that Evans and
Rauch(1999) is no longer in present. The myth that has supported the economic growth of
developmental states in 1970s and 1980s is shown to be falsified in present economic
conditions. Meritocratic bureaucracy does not hold significant positive effect on economic
growth after 2008. Even, it is statistically found that meritocratic bureaucratic feature has
negative effect on economic growth. And further case study is needed to verify why such
phenomena take place in presence.
13
VI. Bibliography
Charron, N., Dahlström, C., & Lapuente, V. (2015). Measuring Meritocracy in the Public
Sector in Europe. QoG Working Paper Series, 8, 8.
Chibber, V. (2002). Bureaucratic Rationality and the Developmental State 1. American
Journal of Sociology, 107(4), 951-989.
Cho, W., & Porumbescu, G. (2011). Weberian Bureaucracy and Performance of Civil Service:
Cross-County Analysis. Seoul National University, 1-24.
Clements, B. J., Gupta, S., Karpowicz, I., & Tareq, S. (2010). Evaluating government
employment and compensation. International Monetary Fund, Fiscal Affairs Department.
Dahlström, C., Lapuente, V., & Teorell, J. (2011). Dimensions of bureaucracy II: A cross-
national dataset on the structure and behavior of public administration. QoG Working
Paper Series, 6.
Evans, P. B. (1989, December). Predatory, developmental, and other apparatuses: a
comparative political economy perspective on the third world state. In Sociological Forum
(Vol. 4, No. 4, pp. 561-587). Kluwer Academic Publishers-Plenum Publishers.
Evans, P., & Rauch, J. E. (1999). Bureaucracy and growth: A cross-national analysis of the
effects of" Weberian" state structures on economic growth. American sociological review,
748-765.
Evans, P. B. (2012). Embedded autonomy: States and industrial transformation. Princeton
University Press.
Ho, S. P. (1987). Economics, economic bureaucracy, and Taiwan's economic development.
Pacific Affairs, 226-247.
Huskey, E. (2010). Elite recruitment and state-society relations in technocratic authoritarian
regimes: The Russian case. Communist and post-communist studies, 43(4), 363-372.
Leff, N. H. (1964). Economic development through bureaucratic corruption. American
behavioral scientist, 8(3), 8-14.
Lee,Y.H.(2009).The Institutionalist Political Economic Developmnetal State Theory and
Democracy. 21st centry Political Science Review, 19(2),99-120
Lee,Y.H. (2016). Regulatory Reform and the Reinforcement of the Bureaucratic Power in South
14
Korea. Journal of East and West Studies, 28(1), 233-258.
Libman, A. (2012). Democracy, size of bureaucracy, and economic growth: evidence from
Russian regions. Empirical Economics, 43(3), 1321-1352.
Olsen, J. P. (2006). Maybe it is time to rediscover bureaucracy. Journal of public
administration research and theory, 16(1), 1-24.
Öniş, Z., Amsden, A. H., Deyo, F. C., Johnson, C., & Wade, R. (1991). The logic of the
developmental state.
Pollock III, P. H. (2015). The essentials of political analysis. Cq Press.
Rauch, J. E., & Evans, P. B. (2000). Bureaucratic structure and bureaucratic performance in
less developed countries. Journal of public economics, 75(1), 49-71.
Seligman, L. G. (1964). Elite recruitment and political development. The Journal of Politics,
26(3), 612-626.
Silberman, B. S. (2005). The bureaucratic state in Japan: the problem of authority and
legitimacy. CORNELL EAST ASIA SERIES, 123, 226.
Van Rijckeghem, C., & Weder, B. (2001). Bureaucratic corruption and the rate of temptation:
do wages in the civil service affect corruption, and by how much?. Journal of development
economics, 65(2), 307-331.
Woo-Cumings, M. (1999). The developmental state. Cornell University Press.