Critique of the "Institutions Cause Economic Development" View
These may be loosely translated to mean “institutions”.
Economic insti-tutions are also important because they help to allocate resources to their most efficientuses, they determine who gets profits, revenues and residual rights of control. Whenmarkets are missing or ignored (as they were in the Soviet Union, for example), gainsfrom trade go unexploited and resources are misallocated. Societies with economic in-stitutions that facilitate and encourage factor accumulation, innovation and the efficientallocation of resources will prosper.
Institutions conducive to development pool resources to provide the investments in education, health and infrastructure which lie at the basis of economic interaction and are necessary and complementary to private investment. Informal institutions lie at the basis of an economy. They include public agencies, trade unions, community structures and professional associations. They make up the fabric which determines the response to laws and government decisions. Most often they shape these outcomes themselves.
Conversely the most dynamic emerging countries are precisely those with have the most structured States.
Putnam, R., 1993. Making Democracy Work : Civic Traditions in Modern Italy, Princeton : Princeton University Press.
Rodrik, D., 2000. “Institutions for High-Quality Growth: What they are and how to acquire them”. Working Paper 7540, February.
Rodrik, D., Subramanian, A., and Trebbi, F., 2004, “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development”, Journal of Economic Growth, 9(2), p.131-165.
Savoia, A., Easaw, J., McKay, A., 2010. “Inequality, Democracy, and Institutions: A Critical Review of Recent Research”, World Development, Vol. 38, No. 2, pp. 142–154.
Shirley, M. M., 2005. “Institutions and Development”. In Claude Ménard and Mary M. Shirley, eds., Handbook of New Institutional Economics. New York: Springer.