The Result Of Institutions On Economic Growth And Development
First of all, it would be appropriate to start this literature review with the definition of institutes as it is given by the American economist D. North. “Institutions are a set of rules, compliance procedures, and moral and ethical behavioral norms designed to constrain the behavior of individuals in the interests of maximizing the wealth or utility of principles. In consequence they structure incentives in human exchange, whether political, social, or economic.” (North 1981)
One major fact of the last century that concerns economic development and economy in general even nowadays, is the existence of not only rich but poor countries, many of them extremely poor, and the huge gap between poor and welfare states. The disability of these poor countries to reach other rich, industrialized nations is of concern. Institutions play a major role, on the development and the long term prosperity of each country. There are a lot of economists that point out that the quality of institutions explains perfectly the development process of each country and the disparity that exists among countries. The idea that a country in order to be prosperous has to have good economic institutions dates back at least to Adam Smith. Institutions exist and work with a different way in each country.
Society, geographic position of the…