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Institutional Reform Design: А New Chapter of Economics

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  • Polterovich, Victor

Abstract

In this paper I argue that the Theory of Reform may be considered as a comparatively new but intensively forming chapter of Economics. In spite of great variety of concrete reforms, the problem of institutional reforming admits general formulation and general approaches of solving it. I discuss some important steps in the development of the Theory of Reform, and then describe its state-of-the art. Since the theory is new, its architecture is not set completely. In the final part of the paper, I will present my own visions of this architecture. It is a typical case in the practice of reforms, when a reformer, who seeks to build an institution with desired properties, discovers that its immediate implementation is impossible because of resource, technological, cultural, political or institutional constraints. In this case, one has to construct a sequence of interim institutions which, for each moment of time, satisfy the existing constraints, and, in the end, provide the implementation of the desired institution. I describe some methods and constructions that can be used to create sequences of interim institutions; illustrations are extracted from the reform experience of China, Russia, and other countries.

Suggested Citation

  • Polterovich, Victor, 2014. "Institutional Reform Design: А New Chapter of Economics," MPRA Paper 54811, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54811
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    References listed on IDEAS

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    1. Hillman, Arye L. & Ursprung, Heinrich W., 2000. "Political culture and economic decline," European Journal of Political Economy, Elsevier, vol. 16(2), pages 189-213, June.
    2. Berglof Erik & Roland Gerard, 1995. "Bank Restructuring and Soft Budget Constraints in Financial Transition," Journal of the Japanese and International Economies, Elsevier, vol. 9(4), pages 354-375, December.
    3. Castanheira, Micael & Roland, Gerard, 2000. "The Optimal Speed of Transition: A General Equilibrium Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 219-239, February.
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    More about this item

    Keywords

    shock therapy and gradualism; institutional trajectories; interim institutions; dysfunctions; institutional trap; transaction and transformation costs; norm fixing mechanisms; promising trajectories; manual for reformers;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P5 - Economic Systems - - Comparative Economic Systems

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