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Institutional flexibility and economic growth

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  • Davis, Lewis S.
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    Abstract

    This paper develops a formal model to investigate the relationship between institutional quality - the current set of property rights - and institutional flexibility - the ability to develop new institutions - and relate these aspects of institutional structure to dynamic economic performance. The model is used to analyze two types of institutional reform. An increase in institutional quality lowers market transaction costs, producing an immediate but short lived increase in the rate of economic growth. In contrast, an increase in institutional flexibility results in a delayed but permanent increase in economic growth. The analysis suggests that the current work on institutions places too much emphasis on property rights and too little on the determinants of institutional change.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Comparative Economics.

    Volume (Year): 38 (2010)
    Issue (Month): 3 (September)
    Pages: 306-320

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    Handle: RePEc:eee:jcecon:v:38:y:2010:i:3:p:306-320

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    Web page: http://www.elsevier.com/locate/inca/622864

    Related research

    Keywords: Growth Institutions Division of labor Labor specialization Transaction costs;

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    Cited by:
    1. Giacomo De Luca & Anastasia Litina & Petros G. Sekeris, 2012. "Growth-Friendly Dictatorships," CREA Discussion Paper Series 12-13, Center for Research in Economic Analysis, University of Luxembourg.
    2. Tamilina, Larysa & Tamilina, Natalya, 2012. "When formal institutions fail in fostering economic growth: the case of post-communist countries," MPRA Paper 48352, University Library of Munich, Germany, revised 01 Nov 2012.
    3. Emmanuel Flachaire & Cecilia Garcìa-Peñalosa & Maty Konte, 2011. "Political versus Economic Institutions in the Growth Process," Working Papers halshs-00586038, HAL.

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