institutional performance

institutional performance, quality of public-service provision. The concept focuses on the performance of various types of formal organizations that formulate, implement, or regulate public-sector activities and private provision of goods for the public. Therefore, institutional performance is often referred to as “governmental performance” or “quality of government,” and it excludes other types of social institutions, such as family or religion. To perform well, institutions have to be responsive to citizens’ demands and expectations and be able to effectively design and implement policies reflecting these demands and expectations. Therefore, quality of institutional performance is assessed in reference to two broadly defined issues: responsiveness and efficiency.

Institutional performance is a matter of primary importance in democratic regimes because this is where accountability is necessary to maintain a government’s legitimacy. Responsiveness, accountability, and impartiality of governmental agencies and equality of all citizens are among the main definitional features of democracy, whereas in nondemocratic regimes coercion, religion, or tradition may serve as a primary source of regime reinforcement and legitimacy. Research shows that nondemocratic regimes tend to have much worse-performing institutions (i.e., less transparent, less responsive, less efficient).

Indicators

There has been an increasing interest in developing indicators of institutional performance. There exist two major methods of assessing performance quality. The first one refers to the public’s confidence in institutions—that is, to citizens’ beliefs that institutions’ agents are fair, are competent, and bring about desirable outcomes. This approach assumes that the general public recognizes whether institutions perform well or not and reacts to this. Therefore, this approach uses public opinion surveys, especially survey questions about respondents’ confidence in various types of public institutions (such as parliament, police, government, the legal system). Public opinion-based indicators are relatively sensitive to short-term changes and isolated events, such as political scandals, and they tend to reflect evaluations of the current government policies and satisfaction with public services available to an average citizen. Therefore, they are particularly adequate to explore the institutions’ degree of responsiveness.

The second approach uses expert surveys and conventional statistical measures (such as levels of spending, unemployment rates) to create objective indicators of performance. The paradigmatic example is the Worldwide Governance Indicators project, which looks at (among other issues) government effectiveness—defined as the quality of public-service provision and of the bureaucracy, competence and independence of the civil service, and government’s commitment to policies—and at regulatory quality, which is defined as the lack of excessive regulation and the low incidence of market-unfriendly policies. Objective indicators capture relatively stable institutional characteristics and are less sensitive to short-term changes. Both types of measures—public opinion and objective indicators—can be used to analyze trends over time in performance or to make comparisons between different institutions within the same country or equivalent institutions across countries. A simultaneous decline in the quality of several institutions is likely to be an indicator of a system-related political crisis.

Determinants

There is significant interest in the possible determinants of good institutional performance. The concept of social capital, linking institutional quality with the culture of trust and reciprocity and widespread civic activism among the general public, became particularly popular among academics and policy makers. This concept suggests that where citizens are engaged in community affairs and public issues and are willing to compromise over polarizing issues, overcoming collective action problems becomes easier and “rent-seeking” and patronage practices among public officials are less likely. Therefore, social capital promotes broad interest articulation and ensures active evaluation and verification of institutions’ responsiveness. However, critics of the social capital approach argue that the relationship between social capital and institutional performance is in fact reversed and that citizens’ attitudes and engagement are determined by institutions’ quality.

An alternative approach to understanding the determinants of institutional performance focuses on institutions’ organizational features and places the issue of public-sector performance within the framework of private-sector and business management. Proponents of this approach believe that, to be efficient and profitable, firms must have the capacity to flexibly respond to customers’ changing expectations. Therefore, proponents search for the determinants of institutional performance predominantly within the public administration’s capability to reform itself efficiently to become more responsive to citizens’ demands.

Implications

Quality of institutional performance has numerous important implications. Institutions that perform well are likely to elicit support, confidence, and compliance from citizens. Good institutional performance generates support for the government and, more generally, for the political regime. This is particularly important in countries undergoing political transformation where democracy has not yet fully consolidated. Poor performance undermines citizens’ confidence in institutions, which may result in political apathy and decreased legitimacy of the regime. Citizens’ perceptions of institutions as trustworthy and competent influence citizens’ compliance with the law.

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Economic growth is also dependent on institutional performance. The quality of bureaucracy and the regulatory framework reflecting government’s general attitude toward business influence firms’ productivity. They form an economic environment that strongly influences the degree of capital accumulation, skill acquisition, technology transfer, and invention. Law enforcement is the key element preventing private diversion of economic outputs, whereas government expropriation, confiscatory taxation, and corruption are the major means of public diversion in an economy. Therefore, the quality of government and institutional performance strongly affects national growth.