Claudia Williamson on Informal Institutions

I haven’t yet read this paper from the latest Public Choice, but it looks very good. Williamson, C. 2009. ‘Informal institutions rule: institutional arrangements and economic performance.’ Public Choice 139(3), pp.  371-387.


Institutions are widely believed to be important for economic development. This paper attempts to contribute to our understanding of how institutions matter by examining the effect of formal and informal institutional arrangements on economic progress. Formal institutions represent government defined and enforced constraints while informal institutions capture private constraints. The findings suggest that the presence of informal institutions is a strong determinant of development. In contrast, formal institutions are only successful when embedded in informal constraints, and codifying informal rules can lead to negative unintended consequences. This suggests that institutions cannot be easily transplanted in order to spur economic development.

Hat tip: Division of Labour. Claudia blogs at The Perfect Substitute.

5 Responses

  1. Boettke, Coyne and Leeson already said this in , “Institutional Stickiness and the New Development Economics,” The American Journal of Economics and Sociology, April 2008, vol 67, no. 2 (331-358)? In fact they use a variant of Mises’s regression theorem applied to institutions as the analytical lynchpin. I don’t know of an ungated version.

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