Modeling institutional evolution
Neyapti, B. (2013). Modeling institutional evolution. Economic Systems, 37(1), 1-16.
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/12799
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. © 2012 Elsevier B.V.
- Department of Economics