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Modeling institutional evolution

Bilin Neyapti ()

Economic Systems, 2013, vol. 37, issue 1, 1-16

Abstract: This paper proposes a formal framework to analyze the process of institutional evolution in relation with economic progress. Institutions have both formal (F) and informal (N) aspects that may exhibit varying processes of change. N is hypothesized to evolve with the level of capital stock, as in learning by doing, whereas F is chosen optimally by a government that maximizes output subject to social and political costs. F and N together define the production technology and affect the income level. Consistent with evidence, simulations of the model's solution reveal that optimum F exhibits a punctuated pattern.

Keywords: Institutional evolution; Punctuated path; Growth (search for similar items in EconPapers)
Date: 2013
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Working Paper: Modeling Institutional Evolution (2010) Downloads
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Handle: RePEc:eee:ecosys:v:37:y:2013:i:1:p:1-16