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There is a large literature on the role and importance of institutions in determining economic performance of nations, as well as about formation of institutions. There is, however, much less discussion about governance, even though governance – “the process of decision-making and the process by which decisions are implemented (or not implemented)” (UNESCAP) – is arguably as important for performance of countries and the well-being of their citizens.

Further, the literature about the different aspects of governance, for example, the agency relationship between the state (or government) and the citizens, the political economy of (among other things) lobbying and state capture that affects different aspects of governance, conflict that may be a direct or indirect consequence of weak governance etc, is fragmented.

In particular, there are separate discussions about the dynamics of state formation, the evolution of rules that govern relationship between states and private citizens, economic governance through establishment and enforcement of the rule of law, and political systems such as democracy. The aim of the ongoing research is to attempt to integrate this literature into a unifying framework, by looking at governance through the prism of social contract and add to the conceptual insights using a mix of empirical work and case studies.