AbstractThe focus of policy reform in developing countries has moved from getting prices right to getting institutions right, and accordingly countries are increasingly being advised to move towards "best-practice" institutions. This paper argues that appropriate institutions for developing countries are instead "second-best" institutions -- those that take into account context-specific market and government failures that cannot be removed in short order. Such institutions will often diverge greatly from best practice. The argument is illustrated using examples from four areas: contract enforcement, entrepreneurship, trade openness, and macroeconomic stability.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14050.
Date of creation: Jun 2008
Date of revision:
Publication status: published as Dani Rodrik, 2008. "Second-Best Institutions," American Economic Review, American Economic Association, vol. 98(2), pages 100-104, May.
Note: EFG PE POL
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Other versions of this item:
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-13 (All new papers)
- NEP-CWA-2008-06-13 (Central & Western Asia)
- NEP-DEV-2008-06-13 (Development)
- NEP-ENT-2008-06-13 (Entrepreneurship)
- NEP-PKE-2008-06-13 (Post Keynesian Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- On the pitfalls of institutional reform in developing economies
by Economic Logician in Economic Logic on 2008-07-11 15:34:00
RePEc Biblio mentionsAs found on the RePEc Biblio, the curated bibliography for Economics:
- > Schools of Economic Thought, Epistemology of Economics > Heterodox Approaches > Institutional Economics
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