Inst. and Eco. Growth

According to North, institutions are “best understood as the ‘rules of the game’ (North, 1990) which shape human behaviour in economic, social and political life.” It is further discussed as “Effective institutions provide for predictable and stable patterns of interaction in all walks of life. So institutions are thus best thought of as durable social rules and procedures, formal and informal, which structure—but do not determine—the social, economic and political relations and interactions of those affected by them (Leftwich, 2006, 2007).”

As one study has stated, institutions are sets of rules and because of that they are “not self-regenerating or self-sustaining—and they achieve little on their own.” Institutions require legitimacy, consistency and compatibility with other institutions, maintenance, implementation and review for it to be effective and maintained. It is also important to understand how it works and how it is implemented.

There are two kinds of institutions, formal and informal. Formal economic institutions define and protect property rights, determine the ease or difficulty and length of time it takes to start a business, facilitate exchange and promote and regulate organized coordination and competition (Wiggins and Davis, 2006).

Informal economic institutions include conventions, norms and traditions which might govern access to opportunities (or credit) as between genders or social groups, or which embody the rules which facilitate cooperation between some groups while excluding others. They are often almost indistinguishable from social institutions and also have political implications.

With that in mind, we find out what is the relationship between institutions and economic growth. There are many fa...

... middle of paper ...

...

Works Cited

1. Le, T. (2009) Trade, Remittances, Institutions, and Economic Growth, International Economic Journal, 404, 406.

2. Leftwich, A. and Sen, K. (2011) “Don’t Mourn; Organize” Institutions and Organizations in the Politics and Economics of Growth and Poverty-Reduction, Journal of International Development, 320-323, 326

3. Anderson, G and Hachem, K. (2013) Institutions and Economic Outcomes: A Dominance-Based Analysis, Econometric Reviews, 180-181.

4. Pop Silaghi, M. and Mutu, S. (2013) The Impact of Institutions on Economic Growth in Emergent Economies, Review of Economic Studies and Research Virgil Madgearu, 138, 148, 146.

5. North, D. (1990) Institutions, Institutional Change and Economic Performance

6. Leftwich A. (2006) What are institutions?, IPPG Briefing Paper 1.

7. Wiggins S, Davis J. (2006) Economic institutions, IPPG Briefing Paper 3.