The credibility of (in)formality:or, the irrelevance of institutional form in judging performance

Informal institutions are often labeled as inefficient or “second-best” compared to formal property rights. Yet, the experience in developing and allegedly “developed” contexts alike demonstrates that informality can perform critical functions without detracting from their performance in socio-economic, political, cultural, and environmental terms. This special issue challenges conventional assumptions on the form of institutions by positing that informal arrangements as they have endogenously emerged and persist are functional and thus credible. To achieve this, the collection validates a double prediction of the Credibility Thesis: i) divergent institutions may perform identically to the same extent that identical institutions perform differently; and ii) institutions do not converge but diverge over the course of development. In accordance with the first prediction, the contributions examine the performance of formal arrangements such as lease, ownership, and strata rights as opposed to informal slums, “urban villages”, and self-governed commons. Following the second prediction, the contributions question the prevalence of formal arrangements in the Global North (such as the United Kingdom, Greece, and Israel) to the same extent as they ascertain the credibility of informal arrangements in the Global South (such as in China, South Africa, and Serbia).