Association for Public Policy Analysis & Management

What explains economic change across American Indian reservations? Across counties, economic or material well-being has been assessed in a number of cross-national studies and there is some agreement that institutions matter in shaping economic outcomes (Acemoglu, Johnson, and Robinson, 2005; Engerman and Sokoloff, 1997; D. C. North, 1990; Przeworski, 1991; Sokoloff and Engerman, 2000). Similarly, when examining the economies of American Indians, the scant but emerging scholarship has largely focused on institutional factors that may shape various patterns of economic development and performance (Anderson, 2013; Anderson, 1992; Anderson and Parker, 2008, 2009; Cornell, 1988; Cornell and Kalt, 1992; Cornell and Kalt, 1998, 1998, 2000). But what kinds of institutions matter more for economic development on American Indian reservations: local indigenous institutions or state institutions?

In this paper, I examine these competing institutional explanations. Contrary to mainstream economists who argue that indigenous institutions do not provide conditions suitable for economic development—but state institutions do—I find and argue that indigenous institutions are more effective at creating conditions to improve indigenous economies, especially when Native nations are transparent in their governance and lawmaking capacities.