Are we all playing the same game? The economic effects of constitutions depend on the degree of institutionalization

•The degree of institutionalization varies across countries•When institutionalization is low, formal institutions should matter less for outcomes•This paper proposes a new index of institutionalization to test the hypothesis•The effect of formal rules on outcomes is indeed conditional on institutionalization

This paper addresses an important source of variation within democracies - the degree of institutionalization. The concept of institutionalization describes the extent to which politics takes place, and is believed to take place, via formal political institutions. Countries vary in their degree of institutionalization, hence, in the degree to which political actors pursue their goals via conventional politics or via “alternative political technologies”. This paper postulates that if politics is conducted largely outside of formal channels, the structure of the formal channels should not matter much as a determinant of policy outcomes. To address this issue this paper proposes a new index of institutionalization and with it revisits seminal work regarding the impact of constitutions on public spending. The findings show that the effect of constitutional rules on policy outcomes is conditional on the degree of institutionalization.