Credibility of institutions in Addis Ababa (Ethiopia), effects of government policies on real estate developers

Credibility is the measure of how institutions are perceived as a result of autonomous endogenous patterns of interaction and power differences. It is not the tenure security in the sense of neo-classical economics that matters but the perceived security and whether developers have the assurance to retain the fruits of their investment. What matters in performance of institutions is not their form but their functions as it is determined temporally and spatially in terms of economic efficiency, stability and growth. Against this backdrop the paper analyzes how relevant institutions function by taking the case of real estate developers in transitional real estate markets of Addis Ababa. We will determine to what extent institutions are functional and whether the changes taking place lead to the development of more credible institutions or not. In the transition process there is ample space for autonomous endogenous patterns of interactions and transactions among economic actors and citizens. We analyze the process of changing functionalities studied to better understand the existing and changing functions of the relevant institutions, using the analytical framework developed by Ho (2014) and describe the functioning of institutions, while drawing conclusions on the role and credibility of institutions. Despite the adverse environment for real estate companies and a government crackdown on real estate developers the Ethiopian economy continued growing at more than ten per cent per year. Insecure tenure rights did not inhibit economic growth and real estate developers continued to invest.

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