1 Institutional Economics of Development: Some General Reflections By

Institutional Economics is now a thriving subject in development, as it should be, since the major difference between the economics of rich and poor countries is arguably in the different institutional framework we implicitly or explicitly use in understanding or analyzing them. Other substantial differences, say in geography or culture or history also work sometimes through institutional differences. As institutional economics of development is a vast subject, in this paper I shall confine myself to a subset of institutional issues, still keeping the range rather broad, broader than most of the other chapters in this book. In this chapter, after a brief foray into the history of economic thought regarding institutions particularly in development economics, I shall mainly try to (a) unbundle the complex of generic institutions important for development, going beyond the narrow focus of the current institutional 2 economics literature on security of property rights; (b) speculate on the processes of institutional change (or lack of change), in particular on what should be a central question of institutional economics of development-- why do dysfunctional institutions persist over long periods of time-- and focus on the impact of distributive conflicts in this context; and (c) wrap up with a reference to a central dilemma in governance institutions and some suggestions for future research. Our focus all through will be on the role of distributive conflicts in shaping institutions