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The Role of Institutions

What are institutions they are the rules of the game

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Unformatted text preview: countries save enough, invest enough, develop and use technologies? Why do some countries lack “functioning” markets? Property rights are often so unreliable that the transaction costs are so high. What are institutions?: They are the rules of the game in a society, humanly devised constraints that shape human interaction (Douglass North) Institutions: Are humanly devised Set constraints Shape incentives Types: Economic institutions ! economic rules of the game (property rights, contracting institutions) Political institutions ! political rules of the game (democracy vs. authoritarianism) Why do they matter? This may be the variable through which many other variables exert a long- term influence: Government Culture Power Education Inequality All of this leads to economic growth and development Economic institutions and...
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