Institutional Bypass: An Alternative for Development Reform

48 Pages Posted: 21 Apr 2011  

Mariana Mota Prado

University of Toronto - Faculty of Law

Date Written: April 19, 2011


Beginning in the 1990s, an institutional perspective on development has become increasingly prominent in development thinking, captured in the mantra, “Institutions Matter,” or “Governance Matters.” Based on the assumption that “institutions matter”, there has been a massive surge in development assistance for institutional reform projects in developing and transition economies involving investments of many billions of dollars. However, these reforms have had mixed to disappointing results thus far. Against this backdrop, this paper identifies successful institutional reforms, and claims that they have one common feature: instead of trying to fix dysfunctional institutions, as most failed reforms do, they simply bypass them. For this reason, they will be called “institutional bypasses”. Like a “coronary bypass” surgery, an institutional bypass creates new pathways around clogged or blocked institutions. Institutional bypass uses the same strategy: it does not try to modify, change or reform existing institutions. Instead, it tries to create a new pathway in which efficiency and functionality will be the norm. Understanding what is a bypass and how it works can provide answers to an important question in the law and development literature: how to reform dysfunctional institutions. This paper argues that under certain circumstances an “institutional bypass” presents a promising alternative for institutional reforms in developing countries, but at the same time it should not be regarded as a panacea for development problems.

Keywords: development, institutional reforms, institutional bypass

JEL Classification: O00, D73, H41, L33

Suggested Citation

Prado, Mariana Mota, Institutional Bypass: An Alternative for Development Reform (April 19, 2011). Available at SSRN: or

Mariana Mota Prado (Contact Author)

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5


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