Why Institutions Endure: Norms, Leadership, and What Enables Reform

Why do most countries remain trapped in bad institutions, while a few transition out? This paper introduces a novel framework highlighting how interactions between societal norms and leadership actions shape institutions. It offers three insights. First, leadership behavior correlates with societal norms through contagion, habit formation, and incentives—cross-country evidence supports this. Second, building on major reforms, the paper shows reforms endure only when norms shift and explains the policy mechanisms behind successful transitions. Third, the paper illustrates how norms anchor strategic reformist-elite interactions.