The Role of Institutions in Growth and Development
In this paper we argue that the main determinant of differences in prosperity across countries are differences in economic institutions. To solve the problem of development will entail reforming these institutions. Unfortunately, this is difficult because economic institutions are collective choices that are the outcome of a political process. The economic institutions of a society depend on the nature of political institutions and the distribution of political power in society. As yet, we only have a highly preliminary understanding of the factors that lead a society into a political equilibrium which supports good economic institutions. However, it is clear that it is the political nature of an institutional equilibrium that makes it very difficult to reform economic institutions. We illustrate this with a series of pitfalls of institutional reforms. Our analysis reveals challenges for those who would wish to solve the problem of development and poverty. That such challenges exist is hardly surprising and we believe that the main reason for such challenges is the forces we have outlined in this paper. Better development policy will only come when we recognize this and understand these forces better. Nevertheless, some countries do undergo political transitions, reform their institutions, and move onto more successful paths of economic development. We also can learn a lot from these success stories.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 1 (2010)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: via Pascoli, 20 - 06123 Perugia|
Phone: +39 075 5855279
Fax: +39 075 5855299
Web page: http://www.rei.unipg.it/rei/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:pia:review:v:1:y:2010:i:2:n:1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ubaldo Pizzoli)
If references are entirely missing, you can add them using this form.