Institutions and Economic Development

Seminar paper from the year 2008 in the subject Politics - Topic: Globalization Political Economics University of Flensburg (European Studies) course: Seminar: World Economic Policy language: English abstract: The main goal of Development Economics is to find the reasons for the rather big differences in levels of income throughout the world. Why for instance did European nations after the eighteenth century develop faster than Asian African or Latin American nations and what can be done to reduce the so caused differences in income and growth?1 In recent years many economists used institutions to explain why structural adjustment programs in poor countries have failed so far. Not the programs itself so the tenor but the lack of good institutions has been blamed for the failure of many developing countries to catch up. In this paper the current institution centered orthodoxy in development economics will be discussed from a critical point of view. In the first part different strands of development theory will be reviewed. Secondly the reasons for the prominence of New Institutional Economics will be analyzed. Finally it will be discussed if the institutional approach is holding its promises and if it is useful to focus on the institutional variable to explain economical development.