Assessing the potential of new institutional economics to explain institutional change: the case of road management liberalization in the Nordic countries

John Groenewegen and Martin de Jong

Journal of Institutional Economics, 2008, vol. 4, issue 1, 51-71

Abstract: Like other network industries, construction and maintenance of transport infrastructure have also seen a recent trend towards liberalization, deregulation, re-regulation, and sometimes privatization. With respect to institutional arrangements, this change implies that previously vertically integrated state-owned enterprises have been replaced by ‘more market’, meaning private ownership and contracts together with regulation by an independent government agency. When economists discuss institutions, this is preferably done in terms of efficiency and equilibrium. We discuss Williamson's Transaction Cost Economics (TCE) and Aoki's Comparative Institutional Analysis (CIA) as being two representative approaches of New Institutional Economics in which efficiency and equilibrium are central. What is the applicability of these two approaches to explain institutional change? The case of road management in Nordic countries provides the empirical evidence. We will draw conclusions as to the strengths and weaknesses of the two approaches and add suggestions to complement the efficiency approach, which allow for a more detailed level of analysis, in which also issues of political power are included.

Date: 2008
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