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Institutional and Non-institutional Explanations of Economic Differences

In: Handbook of New Institutional Economics

Author

Listed:
  • Stanley L. Engerman

    (University of Rochester)

  • Kenneth L. Sokoloff

    (University of California)

Abstract

In this essay, we outline some reasons why one should be cautious about grounding a theory of growth on institutions. We emphasize how very different institutional structures have often been found to be reasonable substitutes for each other, both in dissimilar, as well as similar, contexts. The historical record, therefore, does not seem to support the notion that any particular institution, narrowly defined, is indispensable for growth. Moreover, we discuss how the evidence that there are systematic patterns to the ways institutions evolve undercuts the idea that exogenous change in institutions is what powers growth. Institutions matter, but our thinking about how they matter should recognize that they are profoundly influenced by the political and economic environment, and that if any aspect of institutions is crucial for growth, it is that institutions change over time as circumstances change.

Suggested Citation

  • Stanley L. Engerman & Kenneth L. Sokoloff, 2025. "Institutional and Non-institutional Explanations of Economic Differences," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, edition 0, chapter 30, pages 757-784, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-50810-3_30
    DOI: 10.1007/978-3-031-50810-3_30
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    JEL classification:

    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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