God save the queen, god save us all? Monarchies and institutional quality

Publication Date01 May 2018
AuthorSebastian Garmann
Sebastian Garmann*
Until the beginning of the 20th century, monarchy was the predominant constitu-
tional form and is still in place today in many countries. However, although a
voluminous body of research is concerned with the consequences of constitutions
for human development and institutional quality, research on the consequences of
monarchy is almost non-existent. This paper explores the effects of monarchy on
economic institutional quality and provides evidence that monarchies are associ-
ated with significantly better institutions. Robustness checks indicate that this
result cannot be explained through alternative channels such as monarchies being
on average richer or smaller.
Until the beginning of the 20th century, monarchy was the predominant con-
stitutional form. Most European countries had some form of hereditary rule,
and partly through Europe’s colonial impact many other parts of the
world were widely monarchic. Although many countries have abolished
monarchy in the course of the 20th century, a significant proportion of coun-
tries (over 20% in my worldwide sample) are still monarchies. In some coun-
tries such as Spain, monarchy has even been re-installed. Monarchies often
fare remarkably well in terms of economic performance and human develop-
ment: For example, 6 of the 10 leading countries in the 2013 Human Develop-
ment Index are monarchies. Even 7 of the 10 highest ranked countries in
terms of 2013 GDP per capita are monarchies. Monarchies also tend to score
highly on typical indices of institutional quality such as those studied in this
paper. It is therefore tempting to investigate whether the relationship between
monarchy and institutional quality is systematic, especially because the role of
monarchs is considered largely ceremonial in many countries today and one
might think that monarchy is irrelevant for a country’s performance.
*Ruhr-Universitat Bochum
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12154, Vol. 65, No. 2, May 2018
©2017 Scottish Economic Society.
Economists have seldom studied the causes and consequences of monarchy.
There are only handful exceptions. Regarding the causes of monarchy, that is,
the question why some countries switched from absolute monarchies to repub-
lics, while others became constitutional monarchies, Congleton (2007, 2011)
in contrast to most of the literature on democratization explicitly considers
the transfer of decision-making power from the king to the parliament as part
of the democratization process. Another notable exception is Tridimas (2014),
who models constitutional choice as a costly contest between the king and a
liberal opposition. This contest may either result in a negotiated settlement
between king and opposition (i.e., constitutional monarchy) or a conflict that
either leads to absolute monarchy or republic. A constitutional monarchy is
more likely to emerge, for example, when office rents are large, the proportion
of rents destroyed in fighting is large, or the opposition faces high costs of
collective action.
Regarding the consequences of monarchy, especially on the empirical side,
the literature is also very scarce. I am only aware of four papers that employ
monarchy as an explanatory variable for contemporaneous socioeconomic
outcomes. First, Bjørnskov (2007) studies in a cross-country dataset which
factors influence generalized trust, and includes monarchy as one of several
explanatory variables. Hence, his study is not only concerned with monarchy.
However, it is to the best of my knowledge the first contribution that pro-
vides evidence that monarchy is significantly associated with contemporaneous
socioeconomic outcomes. He finds that monarchies have a significantly posi-
tive association with trust. Second, subsequent papers (Bjørnskov, 2012; Rob-
bins, 2012) confirm this positive association. Third, in a recent contribution,
Bjørnskov and Kurrild-Klitgaard (2014) employ a historical dataset of 27
countries to study whether republics grow faster than monarchies and to what
extent reforms have different effects on the growth process in monarchies than
they have in republics. They do not find any significant differences in eco-
nomic growth, but provide evidence that monarchies benefit from large-scale
economic reforms, while republics do not.
Overall, despite that a wide range of constitutional forms has been studied
in the literature (for surveys, see Voigt, 1997, 2011), the existing knowledge
on monarchies is extremely scarce especially with regard to the important
role that monarchy has played in the history of mankind. Many studies on
constitutions and especially surveys of constitutional economics do not even
mention monarchy or treat monarchs indiscriminately in the same way as dic-
tators or autocrats (Grossman and Noh, 1994).
This paper contributes to the very scarce literature by empirically study-
ing a yet unexplored consequence of monarchies: the quality of economic
institutions. Specifically, I provide cross-sectional evidence that monarchies
are associated with significantly better contemporaneous institutional qual-
ity. For this sake, I employ a worldwide country-level dataset of 211 coun-
tries, of which 50 have some form of monarchic leadership. To measure
institutional quality, in the baseline analysis I use the widely employed
Scottish Journal of Political Economy
©2017 Scottish Economic Society

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