ABSTRACT
This chapter describes to take stock of what people have learned about institutional economics and its relationship to development and to identify significant methodological difficulties that may hinder empirical study of the determinants and effects of institutional change. It explains critical missing links in present knowledge and to design a road map for research and evaluation. The chapter shows few books on institutions and development in the decade of the 1970s, but a proliferation of such books since 1980. What accounts for the rising interest in institutions? First is a new understanding, through economics and other social sciences, of both the determinants and effects of institutions. Empirical work testing institutional hypotheses has frequently been too weak or ambiguous to narrow the range of alternative explanations. Many difficulties arise in identifying the determinants of institutions. Still another methodological difficulty arises when different institutions are functionally interdependent, making it difficult to separate determinants from effects and identifies the direction of causality.
