Institutions Trade & Economic Development
The adoption of new technologies is fundamental for economic development. This might have led one to expect that the more technologically backward a country the more fervently it would adopt new technologies. Yet in fact, one of the greatest difficulties with the process of economic development is precisely the resistance among entrenched interest groups to […]
Partly prompted by the recent financial crisis, a debate has resurfaced about the implications of inequality and political instability for prosperity. One strand of this literature, associated with Lewis (1955) and Kaldor (1956), argues that higher inequality is beneficial for growth because wealthier groups hold the resources necessary for investment. Another strand, which is the […]
The culture hypothesis in economic development states that values, preferences and beliefs of individuals and societies play a key role in economic performance. This is the view endorsed by Max Weber (1930) in his explanation on how Protestantism influenced industrialization. Hayek (1944) stresses the importance of the emergence of a new culture for the creation […]
According to Douglas North’s ‘Institutions Hypothesis’, powerful groups within a society will manipulate their nation’s economic institutions in their own interests if they are not bound by appropriate constraints, with potentially deleterious effects on economic development. The main focus is on institutions that specify and enforce contracts and property rights to reduce transactions costs. Existing […]
One of the great debates in economics concerns the determinants of economic development, investment and growth. Most recently, this literature has focused on whether geography or institutions play the more decisive role in determining economic development. A major issue in this debate concerns the appropriate treatment of the endogeneity of the economic institutions themselves. Much […]
Markets rest on institutions that ensure individuals can commit to keep their contractual obligations. The literature has focused both on formal contract-enforcing institutions, where contracts can be enforced by a third party such as a court of law, and informal institutions where the parties enforce an informal contract themselves. Self-enforcing agreements are particularly important in […]
There is considerable debate over whether and how political institutions affect economic performance and vice versa. Does the form of government, democracy or dictatorship, have an important bearing on economic growth and efficiency, and how does growth affect the consolidation of democracy? Under what circumstances is democracy a spur for greater equality, and does inequality […]