Esra ÇEVİKER GÜRAKAR

Institutions and Economic Development: An Analytic Narrative Approach to Turkish and Iranian Cases

2011

(Supervisor: Fatma Doğruel)

ABSTRACT

Iran and Turkey historically had outwardly similar politoconomic experiences. Particularly after the World War I there were both similar institutional reform programmes on the two countries’ agendas and convergence in their economic growth and development levels. However, this convergence came to a standstill with their picking of totally diverse economic institutions in 1980s. This thesis attempts to provide an analysis of this diverse transformation of economic institutions. It is generally assumed in the study that institutions are not typically chosen for the general benefit of society as a whole. Rather, institutional building is analyzed on the basis of a contest and continuous bargaining among hegemonic actors, who seek to establish rules that structure the outcomes to those equilibria most favorable to them. Thus the view that understanding institutions requires understanding the dynamics of power balances is adopted. Yet, an extension namely the Clash of Paths (CoP) is introduced, within which (1) the inexorable correlation between political and economic institutions; (2) the importance of informal institutions as the foundation on which formal institutions are built; and (3) transformatory effect of co-evolutionary interaction of different institutional paths are highlighted. For the cases of Iran and Turkey it is concluded that post-World War II divergence between political institutional structures of these countries emerged as a major underlying reason behind dissimilar formation of economic institutions in the 1980s. In view of that, formal institutions in Iran is argued to emerge as the products of private contracts that included limited redistributive rents and as the outcomes of competition over influencing the public policy making in Turkey where votes meant credible threats on the part of the masses and led to considerable redistributive rents. As a result, in Iran groups with de facto political power wanted to capture de jure political power and transformed the economic institutional structure in a way that would facilitate the sustainability of the newly formed political institutional structure, whereas in Turkey mediation of different demands led to shifts rather than switches in the economic institutional structure.