Institutional Stickiness and the New Development Economics

Abstract

Research examining the importance of path dependence and culture for institutions and development tells us 'history matters', but not how history matters. To provide this missing 'how', we provide a framework for understanding institutional 'stickiness' based on the Regression Theorem. The Regression Theorem maintains that the stickiness, and therefore likely success, of any proposed institutional change is a function of that institution's status in relationship to indigenous agents in the previous time period. This framework for analyzing institutional stickiness creates the core of what we call the New Development Economics. Historical cases of post-war reconstruction and transition efforts provide evidence for our claim.