Research Topics: Institutions And Development

Institutions and Development

Institutions and Development               There is a wide understanding of the role of institutions in terms of   development of a country. The concept of institutions varies from privately   operated enterprises to government owned properties. Above all, they are the   main contributors in the step towards progress and growth.               Researches reveal that weak or corrupt institutions are the roots of   underdevelopment. Thus, it should have been a great lesson for the third world   countries that developed nations spend billion of dollars in aid and advice just to   nurture economic growth and social development.               Institutions must have necessary complementary qualities in meeting the   challenge of development. There are basically two sets of institutions. The first   set of institutions is the one that nurtures exchange by lowering costs and   increasing the stakeholders trust. It includes contract enforcement mechanisms,   commercial norms and rules, and favoring shared values in terms of   accumulation of human capital. The second set of institutions is the one that   influences the state in protecting privately owned properties rather than taking   over them. They are involved in constitutions, governing laws in education, and   civic norms. Poor countries must have these institutions to aid them in national   development, but under difficult financial situations because of tight competition   in the global market. These institutions require sumptuous funds in order to   acquire adept technology and employ highly skilled workers.               There are many people who live in countries where inadequate or inept   institutions failed to create or sustain foster exchange or protect property. Thus,   these individuals settle for an alternative way in protecting their interests   depending on the type of career they are involved. Politicians hire private armies;   companies exploit networks and connections in any possible threats; while   indigenous people use kinship and ethnicity in protecting their lands and   properties. The state is either incompetent in protecting the property or the state   itself is the one that threatens the property rights, thus, individuals have little or   no trust at all in subjecting to the processes set by the institutions.               Institutions determine the extent of development of a country. Nations with   persistently higher transactions costs have less trade, fewer firms, less   investment and lower productivity. It is the simple logic that stakeholders do not   want to invest in a country where the operational costs are high in compared to   the pace of earning back the capital and profit. Institutions are more likely a big   factor in the economy.               However, when there are institutions that are dedicated in increasing the   certainty of a contract regardless of the complexities of the situation, the   individuals or stakeholders are more willing take the risk in investing in sunken   assets and undertake complicated processes. The norms of trust and   cooperation are being manifested under these circumstances developing the   necessary harmonious relationship between the stakeholders and institutions.               But, contract enforcement and property rights protection is not enough to   achieve the goals towards success. Still, the major problem of third world   countries is the lack of financial investment and surplus money to be used in   capital. Given these, the knowledge and specialized skills of the workers became   the main attractors for additional investors just to expand the capacity of the   enterprise. Integration of productive knowledge from professionals and   universities is needed to gain this alternative route.               On the other hand, the persistent issue is what particular institutions would   make the big difference in the development of a country. Studies show several   fundamentally responsible institutions that will give significant change. And these   are the institutions that protect property rights and enforce laws; civil liberties;   political rights and democracy; institutions supporting social integration and   cooperation. Creating these institutions is a key towards national progress, but it   would be more effective if the state is willing to support these institutions for the   greater good.               There is no shortcut towards economic growth and national progress.   Thus, the state should be committed in taking the responsibility in alleviating the   current situation of the country. Institutions are critical to the development.   Deeper analysis of possible solutions and tested methods are important in   achieving the ultimate goal of progress.                                     References:   Bates, Robert, Institutions and Development   Pande, Rohini and Christopher Udry, Institutions and Development: A view from below, November 2005   Portes, Alejandro, Institutions and Development: A Conceptual Re-Analysis, November 2005 Credit:ivythesis.typepad.com

Institutions and Development

Institutions and Development There is a wide understanding of the role of institutions in terms of develo...