Browsing by Subject "Institutional evolution"

Now showing 1 - 3 of 3

Open Access
Interest groups and institutional evolution
(2011) Arasıl, Yavuz
This study proposes an original formal political economy model of institutional evolution to analyze the effects of evolving interest groups on institutional change by extending the model of Neyaptı (2010). Institutions are categorized as formal (F) and informal (N) institutions that exhibit different evolutionary patterns. N evolves with capital accumulation, as in learning by doing, and F is optimally chosen by a government who maximizes the weighted sum of the utilities of two different interest groups. The level of informal institutions, which represents business ethics, way of doing business or the level of technological know-how, differs for each group. F and N together define the production technology and affect the income level of each group. The model is such that institutions, as well as the levels of income and capital stocks are dynamically interrelated. The simulations of the model show that F exhibits a punctuated evolutionary path. This path is observed to be affected by income share of the institutions, income share of the capital, saving rate and cost of institutional change.
Open Access
Modeling institutional evolution
(2013) Neyapti, B.
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.
Open Access
The nexus of economic and institutional evolution
(Elsevier, 2016) Neyapti, B.; Arasil, Y.
The current state of the development economics literature ascribes an indisputable central role to institutions. This paper presents a formal model of institutional evolution that is based on the dynamic interactions between formal and informal institutions and economic development; the main features of the model is consistent with the fundamental theories that shed light to institutional evolution, namely the collective action and transaction cost theories, as well as dialectics. As informal institutional quality accumulates like technological know-how, while the level of formal institutional quality is chosen by the government to maximize welfare, subject to the economic and political costs. The solution of the model yields a punctuated trajectory of formal institutional evolution. Simulations reveal that the extent of diversity in informal institutional quality across a country delays formal institutional reforms. We also observe that, both the optimal quality of formal institutions and welfare are higher the more homogeneous is the country with respect to its informal institutions or the cultural attributes. © 2015 Elsevier B.V.