Abstract
The paper analyses the various interactions among the institutional and cultural environment and the quality of entrepreneurial activity in Greece. The institutional context and the way in which institutions perform in particular, shape the structure of entrepreneurial incentives. As explicitly demonstrated by Baumol (J Political Econ 98:893–921, 1990) institutions actually channel entrepreneurial talent toward different activities which may be productive, unproductive or destructive. At the same time, informal institutions, i.e. culture and values have proven to be of equal importance for entrepreneurship. Within this context, the paper builds a simple model of rewards’ satisfaction accounting for first, the existence of income externalities, in order to test the hypothesis that individuals care about their relative position, i.e. economic status, and second, for the institutional quality, trust and values pertaining in the society, in order to analyze the possible existence of an underlying ‘social consensus’ that is supportive of rent-seeking behavior in Greece.
Similar content being viewed by others
References
Acemoglu, D. (1995). Reward structures and the allocation of talent. European Economic Review, 39, 17–33.
Aharonovitz, G. D., & Nyaga, E. K. (2010). Values, cultural practices and economic performance: Theory and some evidence from Kenya. World Development, 38(8), 1156–1167.
Arrow, K. J. (1969). The organization of economic activity: Issues pertinent to the choice of market versus non-market allocations. In The analysis and evaluation of public expenditures: The PPB system. Vol. 1. U.S. Joint economic committee 91st congress (pp. 59–73). Washington, DC: U.S. Government Printing Office.
Arrow, K. (1972). Gifts and exchanges. Philosophy & Public Affairs, I, 343–362.
Arrow, A. J., & Debreu, G. (1954). Existence of an equilibrium for a competitive economy. Econometrica, 22(3), 265–290.
Banfield, E. C. (1958). The moral basis of a backward society. New York: The Free Press.
Baumol, W. (1968). Entrepreneurship in economic theory. American Economic Review, 58(2), 64–71.
Baumol, W. (1990). Entrepreneurship: Productive, unproductive and destructive. Journal of Political Economy, 98, 893–921.
Berg, A., & Sachs, J. (1988). The debt crisis: Structural explanations of country performance. Journal of Development Economics, XXIX, 271–306.
Bitros, G. C., & Karayiannis, A. D. (2010). Entrepreneurial morality: Some indications from Greece. European Journal of International Management, 4(4), 333–361.
Bruton, G. D., Ahlstrom, D., & Li, H. L. (2010). Institutional theory and entrepreneurship: Where are we now and where do we need to move in the future? Entrepreneurship Theory and Practice, 34(3), 421–440.
Buchanan, J., & Stubblebine, Wm. C. (1962). Externality. Economica, 29(116), 371–384.
Chang, H. J. (2010). Institutions and economic development: Theory, policy and history. Journal of Institutional Economics. doi:10.1017/S1744137410000378.
Clark, A. E., & Oswald, A. J. (1994). Unhappiness and unemployment. Economic Journal, 104, 648–659.
Cole, J. H. (2003). The contribution of economic freedom to world economic growth, 1980–99. Cato Journal, 23, 189–198.
Duesenberry, J. S. (1949). Income, savings and the theory of consumer behavior. Cambridge, MA: Harvard University Press.
Fafchamps, M. (2004). Social capital and development. University of Oxford, Department of Economics Discussion Paper Series No. 214.
Farr, W. K., Lord, R. A., & Wolfenbarger, J. L. (1998). Economic freedom, political freedom, and economic well-being: A causality analysis. Cato Journal, 18, 247–262.
Frank, R. H. (1985). The demand for unobservable and other nonpositional goods. American Economic Review, 75, 101–116.
Frank, R. H. (1991). Positional externalities. In R. Zeckhauser (Ed.), Strategy and choice: Essays in honour of Thomas C. Schelling (pp. 25–47). Cambridge: MIT Press.
Frank, R. H. (2005). Are concerns about relative income relevant for public policy? Positional externalities cause large and preventable welfare losses. American Economic Review Papers and Proceedings, 95(2), 137–141.
Frank, R. H. (2008). Should public policy respond to positional externalities? Journal of Public Economics, 92, 1777–1786.
Fukuyama, F. (1995). Trust. New York: Basic Books.
Greene, W. (1997). Econometric analysis. New York: Prentice-Hall.
Gwartney, J. D., & Lawson, R. A. (2005). Economic freedom of the world: 2005 Annual report. Vancouver: The Frasier Institute.
Gwartney, J. D., Lawson, R. A., & Holcombe, R. G. (1999). Economic freedom and the environment for economic growth. Journal of Institutional and Theoretical Economics, 155(4), 1–21.
Haggard, S., & Tiede, L. (2011). The rule of law and economic growth: Where are we? World Development, 39(5), 673–685.
Hardin, R. (2001). Conceptions and explanations of trust. In K. S. Cook (Ed.), Trust in society (pp. 3–39). New York City, NY: Russell Sage Foundation.
Henderson, J. (2002). Building the rural economy with high-growth entrepreneurs. Federal Reserve Bank of Kansas City Economic Review, 87(3), 45–70.
Henrekson, M., & Sanandaji, T. (2010). The interaction of entrepreneurship and institutions. Journal of Institutional Economics, 7(1), 47–75.
Hobsbawm, E. J. (1969). Industry and empire from 1750 to the present day. Harmondsworth: Penguin.
IMF. (2013). Greece: Fourth review under the extended arrangement under the extended fund facility, and request for waivers of applicability and modification of performance criterion. Staff Report July 31, 2013. Washington, DC: International Monetary Fund.
Infante, D., & Smirnova, J. (2009a). Entrepreneurship, rent-seeking spillovers and decreasing returns: A microeconomic approach. Acta Oceonomica, 59(1), 79–89.
Infante, D., & Smirnova, J. (2009b). Rent-seeking under a weak institutional environment. Economics Letters, 104, 118–121.
Karabegovic, A., & McMahon, F. (2005). Economic freedom of North America: 2005 Annual report. Vancouver: The Frasier Institute.
Keefer, P., & Knack, S. (1995). Polarization, property rights and the links between inequality and growth. IRIS Center Working Paper No. 153. University of Maryland, College Park.
Khan, M. H. (2000). Rent-seeking as process. In M. H. Khan & K. S. Jomo (Eds.), Rents, rent-seeking and economic development: Theory and evidence in Asia (pp. 70–134). Cambridge: Cambridge University Press.
Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross-country investigation. The Quarterly Journal of Economics, 112(4), 1251–1288.
Konrad, K. A. (2004). Altruism and envy in contests: An evolutionarily stable symbiosis. Social Choice and Welfare, 22, 479–490.
Krueger, A. O. (1974). The political economy of the rent-seeking society. American Economic Review, 64(3), 291–303.
Krueger, N. R., Jr, Reilly, M. D., & Carsrud, A. L. (2000). Competing models of entrepreneurial intentions. Journal of Business Venturing, 15, 411–432.
Lambsdorff, J. G. (2002). Corruption and rent-seeking. Public Choice, 113, 97–125.
Linster, B. G. (1993). A generalized model of rent seeking behavior. Public Choice, 77, 421–435.
MacKenzie, I. A. (2009). Controlling externalities in the presence of rent seeking. Working Paper 09/111, Center for Economic Research, ETH Zürich.
Malone, K., Stewart, S. D., Wilson, J., & Korsching, P. F. (2010). Perceptions of financial well-being among American women in diverse families. Journal of Family and Economic Issues, 31(1), 63–81.
Mangiavacchi, L., & Rapallini, C. (2012). Self-reported economic condition and home production: Intra-household allocation in Italy. Bulletin of Economic Research,. doi:10.1111/j.1467-8586.2012.00446.x.
Mathers, R. L., & Williamson, C. R. (2011). Cultural context: Explaining the productivity of capitalism. KYKLOS, 64(2), 231–252.
Michalos, A. C. (1995). A pragmatic approach to business ethics. Thousand Oaks: Sage.
Michalos, A. C. (2013). The business case for asserting the business case for business ethics. Journal of Business Ethics, 114, 599–606.
Murphy, K., Shleifer, A., & Vishny, R. (1991). The allocation of talent: The implications for growth. Quarterly Journal of Economics, 106, 503–530.
Murphy, K., Shleifer, A., & Vishny, R. (1993). Why is rent-seeking so costly to growth? American Economic Review Papers and Proceedings, 83, 409–414.
North, D. C. (1990). Institutions, institutional change and economic performance. Massachusetts: Cambridge University Press.
Nystrom, K. (2008). The institutions of economic freedom and entrepreneurship: Evidence from panel data. Public Choice, 136, 269–282.
Platteau, J. P. (1994). Behind the market stage where real societies exist: Part II—The role of moral norms. Journal of Development Studies, 30(4), 753–815.
Platteau, J. P. (2000). Institutions, social norms, and economic development. Harwood: Academic Publishers & Routledge.
Pollak, R. A. (1976). Interdependent preferences. American Economic Review, 66, 309–320.
Posner, R. A. (1975). The social costs of monopoly and regulation. Journal of Political Economy, 83(4), 807–828.
Powell, B. (2003). Economic freedom and growth: The case of the Celtic tiger. Cato Journal, 22, 431–448.
Putnam, R. (1993). Making democracy work. Princeton: Princeton University Press.
Ravallion, M., & Lokshin, M. (2001). Identifying welfare effects from subjective questions. Economica, 18, 335–357.
Reynolds, P. D., Hay, M., & Camp, S. M. (1999). Global entrepreneurship monitor. Kansas City: Kauffman Center for Entrepreneurial Leadership.
Senik, C. (2005). What can we learn from subjective data? The case of income and well-being. Journal of Economic Surveys, 19(1), 43–63.
Sobel, R. S. (2008). Testing Baumol: Institutional quality and the productivity of entrepreneurship. Journal of Business Venturing, 23, 641–655.
Sobel, R. S., Dutta, N., & Roy, S. (2010). Does cultural diversity increase the rate of entrepreneurship?. Review of Austrian Economics, 23, 269–286.
Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87, 355–374.
Stinchcombe, A. (1965). Social structure and organizations. In J. March (Ed.), Handbook of organizations (pp. 260–290). Chicago: Rand McNally.
Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20, 571–610.
Tabellini, G. (2007). Institutions and culture. Innocenzo Gasparini Institute for Economic Research, Working Paper No. 330.
Thurow, L. C. (1971). The income distribution as a pure public good. Quarterly Journal of Economics, 85(2), 327–336.
Van Praag, B. M. S. (1991). Ordinal and cardinal utility: An integration of the two dimensions of the welfare concept. Journal of Econometrics, 50, 69–89.
Williamson, C. R., & Mathers, R. L. (2011). Economic freedom, culture and growth. Public Choice, 148, 313–335.
Winkelmann, L., & Winkelmann, R. (1998). Why are the unemployed so unhappy? Evidence from panel data. Economica, 65, 1–15.
Yamagishi, T. (2001). Trust as a form of social intelligence. In K. S. Cook (Ed.), Trust in society (pp. 121–147). New York City, NY: Russell Sage Foundation.
Zacharakis, A. L., Bygrave, W. D., & Shepherd, D. A. (2000). Global entrepreneurship monitor: National entrepreneurship assessment: United States of America. Kansas City: Kauffman Center for Entrepreneurial Leadership.
Zak, P. J., & Knack, S. (2001). Trust and growth. The Economic Journal, 111, 295–321.
Acknowledgments
We would like to thank an anonymous Journal reviewer for his insightful and constructive comments that have much benefited our work.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Petrou, A., Daskalopoulou, I. Is Greece a Rent Seeking Society? A Research on the Relationship Between Entrepreneurship, Trust and Institutions. Soc Indic Res 119, 1495–1515 (2014). https://doi.org/10.1007/s11205-013-0560-z
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11205-013-0560-z