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Institutions and Economic Performance

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 Economics and Business
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Institutions and Economic Performance

Alise Vītola1, Maija Senfelde2, 1-2Riga Technical University

Abstract. The aim of the current paper is to survey significant commerce in economic development. Division of labour and
literature on the role of institutions in economic performance. A trade expanded the interaction between individuals. It resulted
recent body of literature has argued that the institutions are the
in more civilised social order and more peaceful relations not
fundamental cause of differences in economic development.
Section II outlines the debate on the role of state in economics. only among individuals, but also nations. The notion of
Section III describes the theoretical framework of institutions. invisible hand by Adam Smith implies that the institutions
Section IV illustrates the role of institutions in economic were the key to the wealth of nations. Therefore the state was
performance by quantitative proof. Section V concludes the seen as a provider of institutions “like a gardener who
article. cultivates an environment in which plants can thrive” [1]. As
Adam Smith wrote in the Wealth of Nations: “commerce and
Keywords: institutions, institutional environment, governance,
economic performance, economic development.
manufactures can seldom flourish long in any state which does
not enjoy a regular administration of justice, in which the
I. INTRODUCTION people do not feel themselves secure in the possession of their
property, in which the faith of contracts is not supported by
A recent body of literature has argued that the institutions law, and in which the authority of the state is not supposed to
are the fundamental cause of differences in economic be regularly employed in enforcing the payment of debts from
development. Institutional economics goes beyond the scope all those who are able to pay. Commerce and manufactures, in
of traditional micro and macro analysis. It argues that efficient short, can seldom flourish in any state in which there is not a
operation of market requires more than setting the right prices certain degree of confidence in the justice of government” [2].
and allocating resources in right proportions. The economic thought of mercantilists in Great Britain and
Although large literature in institutional economics focuses continental Europe, as well as the “national economics” in the
on the formal institutions, most often – the property rights and United States and Germany acknowledged the importance of
rule of law, it is only the most visible part. Also culture, trade and commerce. But they focused on the state’s role in
religion, legal origins and even historical events long after providing wealth for the particular nation. A nation was their
they have passed play an important role in modern economics. unit of analysis and the interests of nations were put over the
Indeed, the informal institutions determine the efficiency of interests of individuals. Free trade was not desired in all
formal institutions. Therefore there cannot be a universal situations, as the main goal of a state was to generate positive
institutional design that fits every country and institutional balance of trade (in mercantilism) or productive power of
implantation often fails. Moreover, institutions that operate industry (in “national economics”). Protectionist strategies
efficiently in developed countries most likely will not work in were proposed in order to give sufficient amount of time for
less developed countries, what the experience in the Third local industries to become competitive in world markets. Thus
World and most recently in transition economies shows. the state was advised to take a much more active part in
The aim of the current paper is to survey significant economics than before [1].
literature on the role of institutions in economic performance. In the late 19th and early 20th century the debate on the
The authors focus on the latest findings in the particular field. wealth of nations and the state’s role in economics saw
The structure of the paper is as follows. Section II outlines the contributions from the supporters of the both sides. Max
debate on the role of state in economics. Section III describes Weber opposed the common belief that differences between
the theoretical framework of institutions. Section IV illustrates nations could be explained by the natural resource endowment
the role of institutions in economic performance by and proposed that Protestantism had been the main reason for
quantitative proof. Section V concludes the article. rapid economic development in Western Europe. Moreover,
he contrasted the Western legal tradition with the Chinese law,
II. HISTORICAL FRAMEWORK which was based on spiritual and magic practices. He
During the last centuries a large literature has been devoted concluded that the Western legal tradition led to the
to the role of state in economics. Boettke and Horwitz identify development of capitalism in Western Europe. Weber also
two theoretical tensions in the debate about the role of stressed the importance of fixed tax system, which along with
government. The first proposes that state should provide the legal certainty provided incentives for making responsible
basic framework for mutually beneficial exchange. The decisions [1].
second assumes that state should design a new framework for At the same time, mainstream economics shifted its focus
interaction in society and “actively participate in the game of from analysis of institutions of good governance to analysis of
economics” [1]. government’s economic development policies. The shift to a
In the 18th century moral philosophers, in particular the proactive role of government in engineering the economic
Scottish Enlightenment, stressed the importance of trade and development was strongly influenced by the rise of

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Keynesianism in the post-Great Depression Western World, economics modifies neo-classical theory by retaining “the
wartime experience with strong state intervention, the success fundamental assumption of scarcity and hence competition
of Soviet planning in industrialising agricultural Russia, the and the analytical tools of micro-economic theory”, but
emergence of independent states in the Third World and the modifying the rationality assumption and adding the
creation of international organisations for promoting dimension of time [11].
development. Formalism focused on the search for New institutional economics analyses alternative modes of
equilibrium by optimisation against constraint, and positivism organisation in economics and politics, in firms and markets,
neglected the role of institutions as they were sustained thus helping to understand bureaucratic and incentive
through ideological systems. As Boettke and Horwitz put it, differences in different economic systems. New institutional
“measurement equalled science, whereas discussions of economics is closely related to such disciplines as
property rights, rule of law, constitutional constraints, and development economics, new industrial organisation, new
legitimating belief systems dismissed as prescientific musings comparative economics and economic history [4].
by worldly philosophers”. Thus the development was equalled
B. Institutions and Economic Performance
to rise in the statistical aggregates, first of all GDP. And
underdevelopment was seen just as a shortage of investment, North, the author of one of the most influential works in
technology and stock of human capital [1]. new institutional economics “Institutions, Institutional Change
However, at the end of the 20th century economic thought and Economic Performance” and the winner of the Nobel
returned to the analysis of institutional environment. This shift Prize in Economic Science in 1993, defines institutions as “the
was influenced by the collapse of communism, the transition humanly devised constraints that shape human interaction” –
from socialism to capitalism in post-soviet countries and they are “the rules of the game in society” [6]. North explains
China, as well as the persistent underdevelopment in the Third that “[institutions] are made up of formal constraints (rules,
World. It has been acknowledged that market will not function laws, constitutions), informal constraints (norms of behaviour
effectively unless the institutions of governance (both public conventions and self-imposed codes of conduct), and their
and private) form an environment that fosters productive enforcement characteristics. Together they define the incentive
action [1], [3], [4]. Boettke and Horwitz characterise it as a structure of societies and specifically economies” [11].
“move from the government directly orchestrating economic Institutions affect investment in physical and human capital,
activity to providing the fertile conditions for bottom-up as well as the organisation of production. The crucial
development”, in which “the role of economic policymaker importance of institutions lay in the costliness of transactions.
moves from engineering economic development to cultivating The neo-classic results of efficient markets hold only if it is
economic development” [1]. costless to transact, but empirical research shows that it is not
the case, e.g. Wallis and North found that the transaction
III. THEORETICAL FRAMEWORK sector accounted for 40% of US GNP in 1970. Transaction
costs consist of the costs of measurement, costs of protecting
A. New Institutional Economics rights and costs of enforcing agreements. Strict wealth-
There is a wide discussion on the causes of differences in maximising presupposes that exchange parties will cheat,
economic performance around the world. As Rodnik et al put steal, or lie when the payoff of such behaviour exceeds the
it: “it is hard to think of any question in economics that is of payoff of alternative options. Therefore the parties have to get
greater intellectual significance or of greater relevance to vast information about the valuable characteristics of what is being
majority of the world’s population”. Recent studies have exchanged. Parties also have to be sure about their rights, first
stressed the crucial role of institutions in economic of all – property rights, to what is being exchanged. And last
performance (e.g. [2] – [10]). It has been argued that such but not least, parties have to be sure that there will be a third
factors as innovation, economies of scale, education, capital party who will enforce the agreement, if necessary. Thus,
accumulation are not the causes of growth, but the growth efficient economic institutions reduce transaction costs by
itself, and that the political and economic institutions are the decreasing information costs and risks, e.g. decrease
fundamental cause of differences in economic development uncertainty about the quality of products on the market, reduce
[6], [11]. risks of confiscation and increase contract enforcement
The literature on new institutional economics implies that [6], [11].
the neo-classical approach (the Chicago tradition) and macro-
analytical approach (the Harvard tradition) are insufficient in
analysing economic development, because it focuses on the
operation of markets, not the development of markets. Macro-
analytical approach focuses on the macro-economic
aggregates, such as savings, balance of payments, and the
balance between sectors (mainly industry and agriculture),
whereas the neo-classic approach focuses on getting the right
prices by eliminating tariffs, quotas and subsidies and making
the markets work [4]. North explains that the new institutional

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rules governing elections, property rights, the right of

contract), and institutions of governance – firm and market
modes of contract and organisation (the arrangements that
govern the way in which economic units can cooperate and
compete). He emphasises the importance of the latter and the
bottom-up rather than top-down approach to economic
organisation. Williamson argues that the role of the
governance branch of new institutional economics is to search
for key principles to assess contracts in product markets,
labour markets, finance, governance etc.

Fig. 1. Institutions and economic performance

[made by the authors based on [11]]

In a more general sense – as uncertainty characterises the

economic and political choices we make, we cannot fully rely
on the rationality assumption, which presumes that individuals
do what is in their interests and act accordingly. “History
demonstrates that ideas, ideologies, myths, dogmas, and
prejudices matter; and an understanding of the way they
evolve is necessary for further progress in developing a
framework to understand societal change” [11]. Time is an
important dimension regarding institutions, as institutions Fig. 2. A layer schema [4]
evolve as a result of learning processes of human beings – not
just individuals, but societies. Thus, institutions are Figure 2 illustrates the interaction between the individual,
endogenous, determined by the choice of society and a result the governance structures and the institutional environment
of learning through time, which is maintained through culture where the governance embodies de facto transactions in the
(Fig. 1). Moreover, as knowledge is transferred between society. Moreover, the arrow in governance reflects the
generations through the communal culture, institutions are proposition that “organisations have a life of their own”, so
strongly influenced by path dependence. There is no guarantee governance can have a feedback on institutional environment
that past experience will help to solve new problems; therefore and individual level [4].
societies might get stuck in underdevelopment [6], [11]. North
argues that “in fact most societies throughout history got
“stuck” in an institutional matrix that did not evolve into the
impersonal exchange essential to capturing the productivity
gains that came from the specialisations and division of labour
that produced the Wealth of Nations” [11].
North makes a clear distinction between institutions and
organisations. If institutions are “the rules of the game”, than
organisations – “the groups of individuals formed to achieve
Fig. 3. Social infrastructure and output per worker [10]
particular objectives” – and their entrepreneurs are the players.
Some examples of the organisations: political – parties, the Hall and Jones in their article “Why Do Some Countries
parliament, city council, agency; economic – firms, trade Produce So Much More Output per Worker than Others?”
unions, farms, cooperatives; social – churches, clubs, argue that the differences in output per worker are caused by
associations; educational – schools, universities, training social infrastructure (Fig. 3). They define social infrastructure
centres. Sometimes organisations are called authorities. as “the institutions and government policies that determine the
Organisations are created as a function not only of economic environment within which individuals accumulate
institutional, but also technological, income and other skills, and firms accumulate capital and produce output”. In
constraints. Furthermore, the level of knowledge and skills by order to reach a high level of output per worker, social
the organisations and their entrepreneurs will determine the infrastructure should provide an environment that supports
economic performance – “the play of the game” [6], [11]. productive activities, encourages capital accumulation, skill
Williamson distinguishes between the institutional acquisition, invention and technology transfer. The ability of
environment – the political and legal rules of the game (e.g. social infrastructure to protect against diversion is essential

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(e.g. theft, corruption and rent-seeking), because diversion acts a sector. State intervention will lead to fewer social losses, if
as a tax on output, as well as leads to the necessity to invest the state has a “more effective government, greater
resources in avoiding diversion. Social control of diversion in transparency, and greater freedom of the press”, whereas
most cases is cheaper than private control due to returns to developing countries need less regulation because of the
scale. Moreover, the power to make and enforce rules against significant risk of public abuse of business. Also “in sectors
diversion might be a powerful preventive instrument itself. “It with more effective market discipline, lower inequality of
is not that the city can put fences [to fight burglary] more resources among participants, and weaker tendency toward
cheaply that can individuals: in a city run well, no fences are monopoly” state intervention will be less efficient in terms of
needed at all” [10]. reducing disorder. By analysing the transplantation of
institutions via wars and colonisation and more recently – in a
voluntary way, Djakov et al suggest that transplantation of
institutions rather than local industry conditions and the power
of interest groups has influenced national modes of social
control over business. They conclude that this might be the
cause for inefficient institutions, as the efficiency of state
intervention depends on the state specific characteristics [3].

Ii pi I. (1)

Evidently, Hall and Jones define social infrastructure as

institutions and government policies [10]. Rodnik et al in their
article “Institutions Rule: The Primacy of Institutions over
Geography and Integration in Economic Development”
propose to “view institutions as a cumulative outcome of past
policy actions” (p. 20). Equation (1) shows policy (p) as a
flow variable and institutional quality (I) – as a stock variable;
i denotes dimension of policy (e.g. fiscal, monetary, trade), α –
the impact of policy on institutional quality and  – the rate at
which institutional quality decreases absent countervailing
action [2].
Fig. 4. Institutional possibilities [3]
C. Economic and Political Institutions
At the same time, while government is the most efficient The most important economic institutions are the structure
provider of protection against diversion, it might turn to public of property rights and the presence and perfection of markets.
diversion – e.g. expropriation, confiscatory taxation, as well as Property rights provide incentives for investment in human
corruption. Therefore a good social infrastructure will limit the and physical capital. Protection against expropriation serves as
scope of rent-seeking [10]. Djakov et al have developed a a powerful incentive to invest, especially in physical capital
theory of institutional design dealing with the conflict between and more-durable assets. Moreover, regimes that provide
the objective to control disorder, which leads to dictatorship, strong support for physical and intellectual property rights
and the objective to control the abuse of state intervention, attract high-technology industries and industries that benefit
which leads to disorder (Fig. 4). Disorder reflects private from specialized, durable assets. Indeed, the quantitative
expropriation in such forms as banditry, murder, theft, analysis by Rodnik et al confirms that institutions have a
violation of agreements, torts, monopoly pricing, whereas larger impact on physical capital accumulation than human
dictatorship refers to expropriation by the state in forms as capital accumulation and productivity: “in the 80-country
murder, taxation or violation of property. In general, as far as sample the coefficient on physical capital accumulation is
market forces can control disorder, dictatorship by the state is about six times greater than on human capital accumulation
needless [3]. and about 3.2 times greater than on productivity”. The
Djakov et al argue that the location of institutional literature also implies that the credibility is more important
possibility frontier is determined by the civic capital. Civil than the actual form of property rights. It points at the
capital is a broader notion than social capital (cooperation in experience of modern China and Russia, where institutional
community) and is influenced by culture, ethnic homogeneity, quality scores much lower in Russia with a regime of private
factor endowments and the physical environment, and last but property rights than in China where there is no formal legal
not least – the human capital. The slope of institutional protection of property rights. This example stresses that de
possibility frontier determines the efficient choice of the form facto institutions are more important than de jure institutions
of social control over business (litigation, private enforcement [4], [8].
of public rules, public regulation or state ownership) and that Market as the most decentralised form of organisation
efficient institutional design should be specific to a country or ensures the most efficient allocation of resources, high-

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powered incentives and outstanding adaptability [4]. The and the enforcement mechanisms to solve the fundamental
supreme role of market in economic performance is most often problem of command (e.g. promotion, penalties,
illustrated by the comparison of socialism, which is criminalisation of disloyal networks, heavy defence spending
characterised by the dominance of hierarchies and capitalism. and secretiveness) became too costly [13].
There is no consensus between the authors whether socialism Nevertheless, it is a conventional wisdom that socialist
collapsed due to inefficient allocation of resources or lack of countries were unable to move from extensive growth,
incentives. Roemer in his speech on socialism reflected on the characterised by constant increase in physical and human
works of Friedrich Hayek and Joseph Schumpeter, which were capital stock, to an intensive growth with high productivity.
written almost 70 years ago, and the book “Farm to Factory: A The estimates by Crafts and Toniolo indicated that in the
Reinterpretation of the Soviet Industrial Revolution” by period 1960–1970 the contribution of total factor productivity
Robert Allen (published in 2005). Hayek argued that firm to labour productivity growth in the Soviet Union was 0.90,
managers would not be able to run firms productively without while in the United States it was 1.54. In the period 1970–
the pressure of competition, which would force them to 1990 it even became negative in the Soviet Union (-0.06),
decrease costs and innovate. Hayek and Schumpeter both while in the United States it decreased to 0.43. Moreover, the
implied that the lack of material incentives would not impede relatively low growth in total factor productivity in USSR was
socialism, because money could be substituted with other not a result of low investment in research and development, as
forms of prestige being more important to highly talented it amounted to 3 per cent of GDP in the 1970s [14].
people and entrepreneurs. Allen claimed that the error of the The most important issues in political institutions are the
system was the inability to create a mechanism for fostering form of government and the extent of constraints on
innovation in the 1970s, when the potential for extensive politicians. They closely interact with economic institutions.
growth had gone. Romer concluded that the failure of Soviet Acemoglu et al argue that political institutions and distribution
economy came from failure of coordination rather than failure of resources are the two main static variables in a causal
of incentives, because there was no shortage in highly relationship (Fig. 5). Political institutions form de jure
educated work force in the Soviet Union [12]. Williamson political power, distribution of resources in the society – de
traced the causes of soviet collapse to “the cumulative burdens facto political power. Together de jure and de facto political
of bureaucracy” referring to Oskar Lange, another participant power determines political and economic institutions; and
in the early debates about the vitality of socialism, who wrote economic institutions, as already discussed, determine
that “the real danger of socialism is that of a bureaucratisation economic performance and the distribution of resources. Thus,
of economic life, and not the impossibility of coping with the economic institutions are chosen for their distributional
problem of allocation of resources”. Interestingly, Lange consequences. Which economic institutions emerge depends
argued that the bureaucratisation might become an even larger on the one who holds the political power. Exactly the
problem in monopolistic capitalism [4]. Harrison explained differences in political institutions and the distribution of
the collapse of socialism by the fundamental problem of political power determine the variations in economic
command in hierarchies. The principal-agent problem occurs institutions [8]. As North argues in his Nobel Prize lecture,
when the principal desires an allocation of resources that “institutions are not necessarily or even usually created to be
differs from the agent’s self-interest and calls for enforcement socially efficient; rather they, or at least the formal rules, are
mechanisms to find equilibrium between the interests of created to serve the interests of those with the bargaining
principal and agent. He argued that the feasibility of power to create new rules” [11].
centralisation of information reached its limits in the 1970s,

Fig. 5. Economic and political institutions and economic performance [8]

Egalitarian distribution of assets and high degree of social changes in the distribution of political power are needed to
mobility lead to relatively equal distribution of economic alter them. Also institutional change that does not destabilise
resources, and representative political institutions become de current political situation is more likely to be implemented
facto power in society. However, as political institutions are although it might not be the most efficient in terms of
more durable than de facto political power, usually large economic performance [8]. Long-run efficiency and credibility

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does not come easily to politicians, because their primary goal are chosen not by the whole society, but by the groups that
is to stay in power in the short and medium term. As control political power. And they will choose such institutions
Williamson puts it, “if politicians with short horizons can that primary maximise their own wealth not the total wealth.
seize assets or otherwise reward favoured constituencies now, This view emphasizes that social conflict may lead to
and if a big (and certain) piece of a small pie is perceived to be underdevelopment even when all groups in society know that
better than a smaller (and uncertain) piece of a bigger but the institutions are not efficient [8]. However, referring to the
deferred pie, credibility may get short”. He argues that ideas of Hayek, from the evolutionary point of view the fittest
professional bureaucracy is more long-run productivity institutions will survive in the long run [3].
oriented because of the job security and a need for a reputation
[4]. IV. QUANTITATIVE EVIDENCE
Everything else equal, economic growth is good for those Hall and Jones confirmed their theory of social
holding political power, because it will increase income that infrastructure as a powerful causal factor of the level of output
they can tax or expropriate, as well as increase returns on their per worker by analysing data on 127 countries and measures
assets. However, new technologies and improvements in on physical capital stock, primary languages spoken, distance
institutions might benefit also other groups in society that from the equator, trade share, openness to trade, educational
could potentially contest political power in the future. There is attainment and mining share of GDP and an index of
no outside third party that could enforce a contract between government anti-diversion policies. They found that
the current political power and their followers; the loss in differences in social infrastructure account for much of the
political power cannot be compensated, at least it is not differences in output per worker, because countries with good
credible. Thus, the commitment problem related to the social infrastructure have high physical and human capital, as
allocation of political power leads to a basic trade-off between well as high productivity. Moreover, the analysis of Hall and
economic productivity and distribution [8]. Acemoglu and Jones affirms that differences in social infrastructure are partly
Robinson call it a “political replacement effect”. Therefore, explained by the influence of Western Europe, because
political power will tend to improve economic performance, countries with a higher share of European languages as a
if: (1) political power faces intense competition; (2) political primary language are characterised by higher measures of
power has gained high level of assurance against commitment social infrastructure and output per worker [10].
problem (e.g. by modifying political institutions to retain some Also Rodnik et al show that institutional quality outweighs
power; (3) the level of human capital in the country is high, geography and trade. By using a large number of indicators of
and thus the future gains of modernisation are higher; (4) geography, integration and institutions in a sample of 80 and
countries face external threats of invasion [9]. Furthermore, 140 countries to measure the effects of institutions, geography
economic change is more likely to happen when: (1) political and trade on income, they found that the institutional quality
power is in the hands of a relatively broad group of society accounts for the most part of differences in income. Rodnik et
with significant investment opportunities; (2) there are limited al conclude that “once institutions are controlled for,
rents that power holders can extract from the rest of society; integration has no effect on incomes, while geography has at
and (3) there are sufficient constraints and checks on those best direct effects”, e.g. oil exporting countries tend to have
who hold political power. [8]. Acemoglu and Robinson stress higher income, whereas countries with the prevalence of
that new technologies and improvements in institutions are malaria – lower income [2]. Regarding the natural resources,
blocked due to the fear of losing power, not the economic one must take into account various experiences in natural
rents [9]. resource rich countries. Often a high share of primary exports
There are several theories that shape the differences in leads to a decrease in GDP and increase in inequality,
economic and political institutions. The Political Coase corruption and civil conflict (more likely regarding capital-
Theorem (efficient institutions view) says that, at least in intensive resources such as oil, but not labour-intensive
democracies, competition among the groups in society will resources as coffee, rice or banana). Especially countries with
lead to efficient policies and choices. However, history shows low institutional quality have become victims of the “resource
that societies often end up with institutions that are not in their curse” [15].
best interests. Therefore Modified Coase Theorem (the
ideology view) emphasizes the role of ideology, when
societies or their leaders disagree on what would be best for
the society. In Coase Theorems it is assumed that social costs
and benefits are weighted to determine the most efficient
institutions. The incidental institutions view stresses that
institutions are determined by historical accidents (e.g. the
way agriculture is organised, legal origins) and persist for a Fig. 6. Institutions, geography, trade as determinants of income
long time and with significant consequences. For example, [made by the authors based on [2]]
civil law provides weaker protection of shareholders than
common law, and ownership of shares tends to concentrate. The results obtained by Rodnik et al. show that some of
Last but not least the social conflict view says that institutions trade and geography indicators even enter the income

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regression with a negative sign; however, such institutional do not fit into the framework of traditional approaches? The
quality indicators as property rights and the rule of law always authors of this article tend to agree that institutions have a life
enter with a positive sign and are statistically significant. of their own; that they are not only an image of de facto
Moreover, when analysing the links among determinants, they operation of a society, but that there is also a feedback over
found that institutional quality and integration have a time from institutions to the society.
significant, positive impact on each other. Also geography has We believe that the interaction between formal and informal
a significant effect on the quality of institutions (Fig. 6). institutions, between history and modern believes and between
Interestingly, French legal origins have a positive effect on the individual and organisations makes institutional economics
income; the impact of having been colonised by the United a very promising discipline. The analysis of institutions should
Kingdom – negative. Also, these regressions do not approve be incorporated in economic research. It is especially
Weber’s claim about the positive role of Protestantism in important for transition countries like Latvia, where the
economic performance [2]. implantation of West European institutions often fails because
Acemoglu et al. argue that institutions, but not geography, of different historical and cultural experience.
explain the causes of reversal of fortune in colonised areas that
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become industrialised and remain underdeveloped. The Much More Output per Worker than Others?," National Bureau of
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analysis of quantitative data on urbanisation and population [11] D.C. North., "Economic Performance through Time," Nobel Prize
density, measures on current institutional quality, economic in Economics documents 1993-2, Nobel Prize Committee, 1993.
performance and geography approves their hypothesis [7]. [12] J.E. Roemer, „Thoughts on Socialism Seventy Years after
Schumpeter”, presented at conference “Neo-Schumpeterian
Economics 09: An Agenda for the 21st Century II”, Trest, Czech
V. CONCLUSIONS Republic, 2009.
The concept of economic development and its factors has [13] M. Harrison, „The fundamental problem of command: plan and
compliance in a partially centralised economy”, Comparative
changed over time. Institutional economics argues that formal Economic Studies, Vol.47 (No.2), pp. 296-314, 2004.
and informal institutions, as well as their enforcement [14] N.F.R. Crafts and G. Toniolo, “Aggregate growth, 1950-2005”, in
mechanisms are the fundamental cause of differences in The Cambridge Economic History of Modern Europe, Volume 2:
1870 to the Present, S.Broadberry and K. O’Rourke, Ed.
economic development. Moreover, the informal institutions Cambridge University Press, 2010, pp. 296-332.
determine the efficiency of formal institutions. [15] R. Van der Ploeg, „Natural Resources: Curse or Blessing?” CESifo
Perhaps the most interesting question regarding the Working Paper Series No. 3125, 15 July 2010.
institutional economics is, paraphrasing Williamson, who Alise Vitola holds a Master’s degree (2008) in Economics from Riga
argued that organisations have a life of their own, whether Technical University with a focus on regional economics.
institutions have a life of their own. Or does the notion of Alise Vitola has seven years of professional experience in public
institutions just serve as an umbrella for all those theories that administration in the fields of national and regional policy planning,

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2012/22 _______________________________________________________________________________________________________________________

monitoring and evaluation. Since 2010 Alise Vitola holds a position of a She has been working for Riga Technical University in different positions.
Scientific Assistant at Riga Technical University. She also works as a free- Since 2003 Maija Senfelde is a Professor of the Faculty of Engineering
lance consultant in local and regional development. Her research interests Economics and Management, from 1997 to 2007 she was a Deputy Dean for
cover such fields as policy planning and coordination, as well as regional Studies, since 2009 she is a Director of the Institute of National and Regional
development. Alise Vitola is a member of Regional Studies Association (UK). Economy. Maija Senfelde is an Expert of Latvian Science Council, Member
E-mail: vitola.alise@gmail.com of Promotion Council, Member of Professors’ Councils of RTU and UL etc.
Main fields for research are macroeconomics, international and regional
Maija Senfelde holds a Doctor’s degree in Economics (1993) from Scientific economy. She has published scientific papers in peer-reviewed journals and
Council of the University of Latvia. articles and is the author of textbooks as well.
E-mail: maija.senfelde@rtu.lv

Alise Vītola, Maija Šenfelde. Institūcijas un ekonomiskā attīstība

Raksta mērķis ir sniegt analītisku literatūras pārskatu par institūciju lomu ekonomiskajā attīstībā. Institūcijas tiek raksturotas kā ietvars, kurā norisinās cilvēku
mijiedarbība, tās ir „spēles noteikumi” sabiedrībai. Institūcijas ir endogēnas, jo tās veidojas sabiedrības izvēles rezultātā. Tiek izšķirtas ekonomiskās un politiskās
institūcijas. Būtiskākās ekonomiskās institūcijas ir īpašuma tiesību struktūra un tirgus darbība. Savukārt būtiskākās politiskās institūcijas ir pārvaldes forma un politiskās
elites darbības ierobežojumi un kontrole. Institūciju ekonomikas teorija apgalvo, ka institūcijas ir ekonomiskās attīstības atšķirību pamatā, jo ekonomiskās institūcijas –
pirmkārt, īpašuma tiesību struktūra un tirgus darbība – ietekmē investīcijas fiziskajā un cilvēkkapitālā, kā arī ražošanas organizāciju. Ekonomiskās institūcijas veido de
jure un de facto politiskā vara valstī. De jure politisko varu nosaka politiskās institūcijas, de facto politisko varu – resursu sadalījums sabiedrībā. Tādējādi ekonomisko
attīstību nosaka ekonomisko un politisko institūciju mijiedarbība. Ekonomisko attīstību veicinošām ekonomiskajām institūcijām ir šādi priekšnosacījumi: politiskās
institūcijas nodrošina politiskās elites darbības ierobežojumus un kontroli; politiskā vara ir relatīvi plašai sabiedrības grupai, kurai ir iespējas veikt nozīmīgas investīcijas;
politiskajai varai ir ierobežotas iespējas gūt ekonomiskos labumus no pārējās sabiedrības daļas. Lielāka varbūtība ir norisināties tādām institucionālajām pārmaiņām, kas
nerada riskus esošās politiskās situācijas turpmākai pastāvēšanai, lai arī šīs pārmaiņas var būt mazāk labvēlīgas ekonomiskajai attīstībai.

Алисе Витола, Майя Шенфелде. Институты и экономическое развитие

Цель статьи - предоставить аналитический обзор о роли институций в экономическом развитии. Институты характеризуются как рамка, в которой происходит
взаимодействие людей, то есть "правила игры" для общества. Институции являются эндогенными, потому что они образовываются в результате выбора
общества. Различают экономические и политические институции. Существенные экономические институции - это структура права собственности и
деятельность рынка. В свою очередь существенные политические институции - форма правления, контроль и ограничение деятельности политической элиты.
Институциональная экономическая теория утверждает, что институции являются основой различий экономического развития, потому что экономические
институции, во-первых, - структура права собственности и деятельность рынка влияет на инвестиции в физический и человеческий капитал, а также на
организацию производства. Экономические институции создают de jure и de facto политической власти страны. Политическую власть de jure определяют
политические институции, политическую влать de facto - распределение ресурсов в обществе. Таким образом? экономическое развитие определяется
взаимодействием экономических и политических институций. У экономических институций, способствующих экономическое развитие, есть определенные
предпосылки: политические институции обеспечивают контроль и ограничение деятельности политической элиты; политическая власть есть у относительно
большой группы общества, имеющей возможности делать значительные инвестиции; у политической власти ограниченные возможности получать
экономическую выгоду (экономические блага) от остальной части общества. Существует большая вероятность, что произойдут такие институциональные
перемены, которые не создают риски для дальнейшего существования действительной политической ситуации, даже если эти перемены могут быть менее
благоприятны для экономического развития.

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