Summary of JOIE article ( First View 26 April 2021) by Katarzyna Bentkowska Warsaw School of Economics, Institute of Markets and Competition, Warsaw, Poland. The full article is available on the JOIE Website.

In 2020, countries unexpectedly faced a new challenge—the COVID-19 pandemic—and they had to take countermeasures to address it. The levels of restrictions imposed varied across countries. However, implementing restrictions does not automatically mean that they are respected. Laws can become rules only if they are not ignored and become customary (Hodgson 2006). For the fight against the pandemic to be effective, people must adapt and follow the restrictions. If individuals do not accept restrictions and continue to behave as they always have, the pandemic will spread more easily, with severe social and economic consequences. Countries, therefore, differ not only in the regulations they impose but also in the degree to which their regulations are respected. An important question arises here—what determines societies’ reactions to the pandemic and the degree of compliance with restrictions?

Answers can be found in the functioning of institutions in a given country. Interactions between formal and informal institutions make it difficult to implement formal rules and anticipate how they will work. Different informal institutions and enforcement mechanisms may yield different outcomes. This is true for institutions designed to support general economic development as well as for specific solutions such as rules implemented to fight the pandemic. The reaction to the pandemic and compliance with formal rules can be related to scale, income inequalities and government welfare support. However, these factors do not provide a good, or at least not a full, explanation. I claim that societies’ response to the pandemic and the effectiveness of the formal rules designed to combat it depend on deeply rooted informal institutions.

In my analysis, I focus on the interaction of formal and informal institutions. Informal institutions are rarely the subject of analysis. Consequently, practical means of assessing them have not been established and their functioning and role remain unclear, though there is a growing consensus on their importance (Boettke et al., 2008; Chavance, 2008; Glaeser et al, 2004; Helmke and Levitsky, 2004; Leković, 2011; Pejovich, 1999; Platje 2008; Williamson, 2009; Williamson and Kerekes, 2011). Despite growing interest in informal institutions, we still know little about their nature, origins and consequences in different settings. 

The scope of restrictions (formal institutions) introduced by governments can be measured with the Stringency Index estimating indices such as school and workplace closure, restrictions on gathering size, restrictions on travelling both internally and internationally, and stay-at-home requirements (Hale et al., 2020). The acceptance of governmental restrictions measures is reflected in individuals’ degrees of mobility decrease and contact reduction, the aims of governmental restrictions. To measure the response to the restrictions, I adopt the residential data from Google Community Mobility Reports, which provide insights into what has changed in response to policies aimed at combating COVID-19 (Google LLC, 2020). Residential index rates the mobility trends for places of residence. 

For the cross-national analysis, I choose 27 European countries and investigate the patterns in the scope of the restrictions and the degree of mobility changes for specified periods from the first wave of COVID. Then I identify a group of attitudes connected with individuals’ responses that differ across countries. They are associated with different kinds of trust, interest in the current situation, support for populism, relations in society, participation in social life and individuals’ resourcefulness. My analysis confirms that differences in informal institutions cause different societal responses. The shape of informal institutions explains whether the extent to which people declined mobility matches government formal restrictions.   Formal restrictions can be seen as successful only if they are supported by strong informal institutions. In some cases, they even define individuals’ reactions more than formal recommendations. 

The findings concerning the relations between formal and informal institutions have some policy implications. Countries with better developed informal institutions can expect their formal rules to be followed. Moreover, in some cases, there is a need for less formal rules as informal institutions may complement them. This situation can decrease the cost of creating and enforcing formal rules. Regardless, the shape of formal institutions is of great importance if people are expected to trust and use them as guidelines in their actions. Conversely, countries with weak informal institutions can expect the effects of their rules to not be as anticipated.

Informal institutions may be insensitive to deliberate change. Weak informal institutions will not become strong immediately;however, some improvement is possible, at least in the long run. For example, in the case of the pandemic, comprehensive and reliable information campaigns about the seriousness of the threat and about possible countermeasures and their effects can help to achieve the restrictions’ aims and direct individuals’ actions in the desired way.

The findings are useful not only for explaining the special case of reaction to pandemic restrictions but also for investigating what generally determines individuals’ compliance with formal rules. 

References

Boettke, P.J., Ch. J. Coyne and P.T. Leeson (2008), “Institutional Stickiness and the New Development Economics”, American Journal of Economics and Sociology, 67(2): 331-358.

Chavance, B. (2008), “Formal and Informal Institutional Change: the Experience of Postsocialist Transformation”, European Journal of Comparative Economics, 5(1): 57-71.

Glaeser, E.L., R. La Porta, F. Lopez-de-Silanes and A. Shleifer (2004), “Do Institutions Cause Growth?”, Journal of Economic Growth, 9(3): 271-303.

Google LLC (2020), Google COVID-19 Community Mobility Reports, https://www.google.com/covid19/mobility/ Accessed: <08.02.2021>

Hale, T., N. Angrist, E. Cameron-Blake, L. Hallas, B.Kira, S. Majumdar, A. Petherick, T. Phillips, H. Tatlow and S. Webster (2020), Variation in Government Responses to COVID-19, Version 7.0, Blavatnik School of Government Working Paper; dataset Accessed: <27.01.2021>

Helmke, G. and S. Levitsky (2004), “Informal Institutions and Comparative Politics: A Research Agenda”, Perspectives on Politics, 2(4): 725-740.

Hodgson, G.M. (2006), “What Are Institutions?”, Journal of Economic Issues, 40(1): 1-25

Leković, V. (2011), “Interaction of formal and informal institutions – impact on economic success”, Economics and Organization, 8(4): 357-370.

Pejovich, S. (1999), “The Effects of the Interaction of Formal and Informal Institutions on Social Stability and Economic Development”, Journal of Markets & Morality, 2: 164-181.

Platje, J. (2008), “Institutional capital” as a factor of sustainable development ‐ the importance of an institutional equilibrium”, Technological and Economic Development of Economy, 14(2): 144-150.

Williamson, C. R. (2009), “Informal Institutions Rule: Institutional Arrangements and Economic Performance”, Public Choice, 139(3/4): 371-387.

Williamson, C. R. and C.B. Kerekes (2011), “Securing Private Property: Formal versus Informal Institutions”, Journal of Law & Economics, 54(3): 537-572.