Compatibility of the Kurdistan Region of Iraq’s Institutions and Economic Development Within Iraq

Abstract

This chapter evaluates whether the KRI’s political and economic institutions are conducive for economic development. There have been growing economic development literatures that point at the importance of having inclusive institutions for sustained economic growth. Inclusive economic institutions create a level playing field for entrepreneurship and businesses, provide secure property rights, and enforce contracts. Inclusive political institutions create a democratic society where groups and interests are represented and their demands are expressed through political mechanisms; which articulates, reconciles and turns such demands into policies. In positioning the need for inclusive institutions, we also explore how various public sector inefficiencies can occur due to shortcomings of bureaucracy, interest groups, and political behaviors within political and economic institutional structures. Public Choice economic literatures show that key actors of political processes may engage in economically damaging behaviors such as rent-seeking activities by well-organized interest groups or short-term political decision making. Thus, society’s resources could be wasted unless well-designed institutional constraints are established, and incentives for economically damaging political behavior are eliminated or reduced. Therefore, a country or region’s institutions, starting from the constitution, need to be designed in a way that will bring transparency in public revenues and expenditure for the public’s scrutiny.