Institutions and Transition
Posted: 3 Jan 2006
Date Written: December 7, 2005
Prepared for The New Palgrave Dictionary of Economics, 2nd Edition, this essay examines the evolution of both institutions and economists' thinking on institutions during transition. Early in transition, institutions were virtually ignored in the majority of normative prescriptions, but were central in the evolutionary-institutional approach. Later, after events influenced intellectual developments, institutions were at the center of analysis. Growth is strongly related to institutional construction. Transition countries built institutions speedily but with marked variation across countries. Legal systems and independent governmental agencies were sources of institutional growth, while government bureaucracies and informal mechanisms detracted from institutional growth. In China, reforms addressed problems that institutions usually do, but in unusual ways.
Keywords: Institutions, transition, evolutionary-institutional, shock therapy, gradualism, China, law
JEL Classification: P2, P3, N4, O17, K0
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