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Modeling Institutional Evolution

Bilin Neyapti ()

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: This paper proposes an original formal framework to analyze institutional evolution. Institutions have formal (F) and informal (N) aspects that may evolve at different paces, although eventually converging towards each other through an dynamic interactive process. N evolves with capital accumulation, as in learning by doing, and F is optimally chosen by the government who maximizes output given the social and political costs of changing F. As transaction-cost-reducing mechanisms, F and N together define the production technology and affect the income level. As consistent with the evidence, calibrations of the model reveal that optimum F exhibits a punctuated equilibra.

Keywords: Institutional evolution; punctuated equilibria; growth (search for similar items in EconPapers)
JEL-codes: E02 O17 O43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo
Date: 2010-04
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Journal Article: Modeling institutional evolution (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:1012

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