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The institutional economics of rural development: Beyond market failure

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  • Valentinov, Vladislav
  • Baum, Sabine

Abstract

This paper examines and compares institutional arrangements addressing market failures endemic to rural areas. It argues that rural market failures cannot be satisfactorily addressed by for-profit firms and thus require the operation of third sector organizations, such as NGOs, cooperatives, and associations. The important role of these organizations in rural development is explained by the particular severity of rural market failures that inhibit the development of rural markets and thus constrain the operation of rural for-profit firms. This argument is applied to the development of rural tourism in Central and Eastern Europe. The rural tourist markets in this region are shown to fail in a number of ways that require recourse to tourism associations and other relevant third sector organizations. The paper concludes with calling for further research on developing the institutional economic theory of the rural third sector.

Suggested Citation

  • Valentinov, Vladislav & Baum, Sabine, 2008. "The institutional economics of rural development: Beyond market failure," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 9(3), pages 457-462.
    • Handle: RePEc:zbw:espost:201571
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    References listed on IDEAS

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    1. Jonathan Kydd & Andrew Dorward, 2004. "Implications of market and coordination failures for rural development in least developed countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(7), pages 951-970.
    2. Geoffrey M. Hodgson, 1998. "The Approach of Institutional Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 166-192, March.
    3. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    4. Williamson, Oliver E., 2005. "Transaction cost economics and business administration," Scandinavian Journal of Management, Elsevier, vol. 21(1), pages 19-40, March.
    5. Martin Petrick & Ingo Pies, 2007. "In search for rules that secure gains from cooperation: the heuristic value of social dilemmas for normative institutional economics," European Journal of Law and Economics, Springer, vol. 23(3), pages 251-271, June.
    6. Uphoff, Norman, 1993. "Grassroots organizations and NGOs in rural development: Opportunities with diminishing states and expanding markets," World Development, Elsevier, vol. 21(4), pages 607-622, April.
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    Cited by:

    1. Barbara Marciszewska, 2021. "The Tourism Sector Under Uncertainty due to COVID-19 Pandemic and the Assumptions of New Institutional Economics," European Research Studies Journal, European Research Studies Journal, vol. 0(2B), pages 158-169.
    2. Baum, Sabine, 2011. "The tourist potential of rural areas in Poland," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17, pages 107-135.
    3. Sonkey Louis Ntu & Bime Mary Juliet Egwu & Mbu Daniel Tambi, 2023. "Informal Institutional Characteristics and Youth Involvement in Agribusiness Entrepreneurship in Fako Division, Cameroon: A Structural Equation Modeling Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(4), pages 222-237, April.
    4. Go, Frank M. & Trunfio, Mariapina & Lucia, Maria Della, 2013. "Social capital and governance for sustainable rural development," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(2), pages 1-7, June.
    5. Makorere, Robert, 2014. "An Exploration Of Factors Affecting Development Of Citrus Industry In Tanzania: Empirical Evidence From Muheza District, Tanga Region," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(2), pages 1-20, April.

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