ABSTRACT
Countries that enjoy above-normal extractive capabilities but have very low institutional credibility are unlikely to register very much success in whatever adjustment efforts they undertake, nor are they likely to achieve sustained economic growth for any length of time. If the heart of the adjustment problem involves redefining the role of the state in society and the economy, the direction of change must be from higher to lower costs in market transactions. The additional economic gains derived from government intervention in the market are "economic rents." While the use of indicators of country risk is an innovative and valid way of measuring institutional credibility, the measures are subjective, and the operational definitions and scoring procedures raise the question of whether they are truly interval-level data. Contract-intensive money, relative political extraction and the mobilization ratio load on just one factor when the other variables are removed from the equation.
