ABSTRACT
This chapter reviews the role of institutions in the economic reform and development process and considers the state of our understanding of the origins of good institutions. It explores a range of policy efforts and indicators of commitment that shows how Latin American democracy has led to a deeper form of citizenship based in genuine state efforts to respond to real needs. Institutions are sets of rules, both formal and informal, that emerge from society and in turn structure social and political interactions. The chapter considers three different ways at evaluating their effect on economic development. The three are political institutions and their role in shaping democratic governance and effective policy-making; the "self-restraining state" and property rights; and the institutional frame for policy reform and implementation. For institutionalists, neoclassical economics works well to explain resource allocation in a developed market economy.
