The main goal of Development Economics is to find the reasons for the rather big differences in levels of income throughout the world. Why, for instance, did European nations after the eighteenth century develop faster than Asian, African or Latin American nations and what can be done to reduce the so caused differences in income and growth?1 In recent years, many economists used institutions to explain why structural adjustment programs in poor countries have failed so far. Not the programs itself, so the tenor, but the lack of “good institutions” has been blamed for the failure of many developing countries to catch up. In this paper, the current institution centered orthodoxy in development economics will be discussed from a critical point of view. In the first part, different strands of development theory will be reviewed. Secondly, the reasons for the prominence of New Institutional Economics will be analyzed. Finally, it will be discussed, if the institutional approach is holding its promises and if it is useful to focus on the institutional variable to explain economical development.
Table of Contents
1. Introduction
2. The Institutional Turn
2.1. Different approaches of explaining growth through institutions
2.1.1. Colonial Heritage
2.1.2. Colonial Heritage Plus
2.1.3. Political Conflict
2.1.4. Beliefs and Norms
2.1.5. International Trade
3. Discussion of the institution centred orthodoxy in development economics
3.1. What is a ‚good property rights system‘?
3.2. How persistent are institutions really?
3.3. Is institutional imitation the road to success?
4. Conclusion
Objectives and Core Themes
This paper examines the "institution-centered orthodoxy" within development economics, critically evaluating the assumption that strong, standardized institutions are the primary prerequisite for economic growth and development in poor nations. The research analyzes the theoretical underpinnings of this perspective, discusses the challenges in defining and measuring institutional impact, and questions the feasibility of institutional imitation as a universal strategy for success.
- Critical review of New Institutional Economics
- The influence of colonial history and geography on institutional formation
- The debate surrounding property rights and development
- The co-evolution of institutions and economic activity
- The limits of institutional imitation and policy blueprints
Excerpt from the Book
3.1. What is a ‚good property rights system‘?
There is a strong emphasize on property rights in the orthodox literature on institutions and development that has been criticized by different authors. Everyone might agree that a prerequisite for economic development is a “good property rights system”. Yet, the question “What is a good property rights system?” is far from easy to answer. The relationship between property rights and economic growth is complex and the property rights system consists of a large number of different institutions. It can hardly be merged into one institution which is then referred to as ‘the property rights system’. As a consequence, scientists often use surveys that include ‘expert’ opinion on the quality of property rights institutions for empirical studies. These surveys are not a very reliable source as their results can reflect the state of business in general instead of the quality of the property right system.
Moreover, certain types of property rights are mentioned while others are being ignored. In addition to open access, private ownership, and state ownership, “communal property rights” as well as hybrid forms similar to those in China could be a possibility but are not being studied. Contrary to this orthodoxy, however, case studies show that many countries have made use of state-owned enterprises during times of economic growth. China is another example which shows that economic development can also work with mixed forms of ownership and rather “unclear property rights”. Thus, a “good property rights system” does not necessarily mean a private property rights system that is modeled by the example of Western countries.
Summary of Chapters
1. Introduction: This chapter outlines the paper's goal to critically analyze the prominence of the institution-centered approach in explaining global income differences and the failure of structural adjustment programs.
2. The Institutional Turn: This section details the rise of New Institutional Economics and reviews various explanatory categories, including colonial heritage, geographical factors, political conflict, beliefs, and trade.
3. Discussion of the institution centred orthodoxy in development economics: This chapter scrutinizes the lack of a universal definition for institutions and questions the efficacy of "global standard institutions" and fixed property rights models.
4. Conclusion: The concluding chapter summarizes the main findings, emphasizing that there is no singular institutional blueprint and that institutional development is both a cause and a consequence of economic growth.
Keywords
Development Economics, New Institutional Economics, Institutions, Property Rights, Economic Growth, Colonial Heritage, Institutional Imitation, Market Liberalization, Political Conflict, Social Norms, Factor Endowments, Structural Adjustment
Frequently Asked Questions
What is the core subject of this research?
The paper evaluates the prevailing "institution-centered orthodoxy" in development economics, which posits that the lack of specific "good institutions" is the primary reason for the economic failure of developing nations.
What are the central thematic fields covered?
The themes include the historical impact of colonial heritage, the role of geography and climate, the influence of social norms and beliefs, and the complexity of implementing standard institutional models globally.
What is the primary objective of this work?
The primary goal is to provide a critical perspective on the institutional approach, questioning whether a focus on institutional variables is sufficient to explain developmental outcomes and whether institutional imitation is a viable path for success.
Which scientific methodology is applied?
The paper utilizes a literature review and a critical discussion of existing theories and case studies from New Institutional Economics to challenge established orthodox views.
What topics are discussed in the main body?
The main body examines various theoretical strands of institutional growth, the ambiguity surrounding "property rights," the persistence of institutions, and the challenges of importing institutions from one cultural context to another.
Which keywords best characterize the work?
Key terms include Development Economics, New Institutional Economics, Institutional Change, Property Rights, Colonial Heritage, and Economic Liberalization.
Why is the definition of "property rights" considered problematic by the author?
The author argues that "property rights" are too broad to be defined as a single system, and that diverse, non-Western, or hybrid ownership models can also be conducive to economic development.
How does the author view the "co-evolution" of institutions and economic activity?
The author suggests that institutions and economic activities co-evolve, and that it is a mistake to assume causality only runs from institutions to growth; rather, economic development also actively shapes institutional change.
- Quote paper
- Marlene Langholz (Author), 2008, Institutions and Economic Development, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/154413
