Building Institutional Legitimacy: Elites, Markets, and Inequality Through the Voice–Choice–Transparency–Trust (VCTT) Framework

<ns7:p>Background Institutional legitimacy—the belief that authorities are just and deserving of compliance—depends on the interplay of participation, pluralism, transparency, and trust. This study applies the Voice–Choice–Transparency–Trust (VCTT) framework to construct a composite institutional quality index (INST) and to identify how elite behaviour, market structure, inequality, and development jointly shape legitimacy across countries. The analysis bridges the conceptual divide between extractive and value-creating power by empirically testing how elite quality and market concentration interact to affect institutional outcomes. Methods Using an unbalanced panel of 22 countries from 2000 to 2004, the study combines hierarchical multiple imputation with panel econometrics. Institutional quality (INST) was derived from standardised VCTT pillars. Core regressors include the Elite Quality Index (EQx), market power (mark-up), the Gini coefficient, and GDP per capita. Two complementary estimators were applied: a fixed-effects (pooled OLS) model and a Mundlak correlated random-effects model, both corrected for heteroskedasticity and cross-sectional dependence using Driscoll–Kraay robust standard errors. Results The fixed-effects model shows that higher Elite index values strongly improve institutional quality (p &lt; 0.01), whereas greater market concentration significantly reduces it (p &lt; 0.01). Moderate inequality displays a small but positive association with institutional stability (p &lt; 0.05). The Mundlak model confirms a positive within-country effect of elite quality (p = 0.004) and a negative effect of rising domestic inequality (p = 0.046). Between-country averages reveal that nations with productive elites and moderate inequality sustain stronger institutions, while persistent market dominance undermines them. Conclusions Across the sample, institutional legitimacy strengthens where elites are value-creating and markets remain competitive. Concentrated market power erodes institutional quality, and inequality’s influence is context-dependent—detrimental when it widens domestically but neutral or stabilising when moderate. Balanced power relations, therefore, underpin transparent, accountable, and trusted institutions within the VCTT framework.</ns7:p>