Informal Institutions and Economic Performance

Abstract

This research examines the direct effect of tribalism on economic performance as well as the moderating roles of governance, in particular Government Effectiveness (GE) and the Rule of Law (RoL), in that relationship. Previous studies have examined tribalism's negative impact on institutional quality but have rarely studied its direct effect on economic performance or how governance can mitigate this effect. This study employs a mixed linear model on a panel dataset covering 73 countries over the period from 2002 to 2022. The results confirm that tribalism has a significant adverse effect on economic performance. Furthermore, the analysis demonstrates that GE significantly moderates this negative relationship, which indicates that strong government capacity can counter the influence of tribalism. RoL, however, does not exhibit statistically significant moderation, implying that formal legal frameworks may be circumvented by informal tribal networks. These results indicate that the dimensions of government vary in their ability to reduce the negative effects of tribalism. Moreover, the study recommends that for policymakers in tribal societies, improving government effectiveness can be a more effective strategy for promoting growth than relying solely on legal frameworks.