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Institutions and economic development: theory, policy and history

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  • CHANG, HA-JOON

Abstract

The article tries to advance our understanding of institutional economics by critically examining the currently dominant discourse on institutions and economic development. First, I argue that the discourse suffers from a number of theoretical problems – its neglect of the causality running from development to institutions, its inability to see the impossibility of a free market, and its belief that the freest market and the strongest protection of private property rights are best for economic development. Second, I point out that the supposed evidence showing the superiority of ‘liberalized’ institutions relies too much on cross-section econometric studies, which suffer from defective concepts, flawed measurements and heterogeneous samples. Finally, I argue that the currently dominant discourse on institutions and development has a poor understanding of changes in institutions themselves, which often makes it take unduly optimistic or pessimistic positions about the feasibility of institutional reform.

Suggested Citation

  • Chang, Ha-Joon, 2011. "Institutions and economic development: theory, policy and history," Journal of Institutional Economics, Cambridge University Press, vol. 7(04), pages 473-498, December.
  • Handle: RePEc:cup:jinsec:v:7:y:2011:i:04:p:473-498_00
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