Institutions and economic development: A focus on the new institutional economics
- Author Stephen Akpo Ejuvbekpokpo
- Co-Author Sallahuddin Hassan
- DOI
- Country : Malaysia
- Subject : Economics
Keywords : Institutions; Institutional change, Economic Development, New Institutional Economics
Abstract
The main objective of this paper is to provide some insights into the literature relating to institutions and economic development, by explaining the main advantages of using such a framework, instead of adopting other perspectives that attempt to explain economic performance without using institutions as a determining element. Institutions, crucial for the analysis of how agents deal with uncertainty, have been gaining increasing relevance on the economic research agenda. In this paper, we analyze the institutional literature that provides insights into different research fields, aiming to explain why this perspective obtains better results than others, in the field of growth and development economics. In particular, we stress the relevance of New Institutional Economics as an adequate framework for a broad understanding of development issues. This study has shown that the relevant literature has already proved that institutions are essential for understanding and explaining economic performance. The existence of positive transaction costs and the subsequent importance of institutions were the latest inspiring discoveries that have motivated some economists to dedicate their research to uncovering the particularities and implications of considering transaction costs in several different areas of the economy.
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