Institutions, Family and Economic Performance

It is usual to formulate policies that react on the consequences, not the causes of family structure. In the design of policies, it is important to consider that institutions evolve in response to individual incentives and affect the performance of political and economic systems. Formal rules influence transaction and production costs (costs for families to offer their services) and could induce development or economic stagnation in the long run. It is necessary to work on incentives toward efficient institutions. The purposes of this paper are: a) to analyse the family trends in past decades; b) to consider the economic externalities of the family (child rearing and human capital investment; social assistance for the elderly, sick and unemployed; economies of scale; mechanism of socialization) and how they are affected by the recent trends of households decisions; c) to identify policies related directly and indirectly on the families structure that could be fostering or preventing faster economic growth in the long run; d) to suggest some new directions for policies that could affect households decisions. Households have experienced enormous changes. However, they are still crucial to a well functioning economy and society: the families play a major role in human capital investment and these investments in people are an essential ingredient to economic progress.