October 3, 2007

Institutional Stickiness and the New Development Economics

  • Christopher Coyne

    Associate Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Peter J. Boettke

    Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Peter Leeson

    Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
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Read this article at Wiley Online Library.

Research examining the importance of path dependence and culture for institutions and development tells us that "history matters," but not how history matters. To provide this missing "how," this paper provides a framework for understanding institutional "stickiness" based on the regression theorem. The regression theorem maintains that the stickiness, and therefore likely success, of any proposed institutional change is a function of that institution's status in relationship to indigenous agents in the previous time period. This framework for analyzing institutional stickiness creates the core of what this paper calls the New Development Economics. Historical cases of postwar reconstruction and transition efforts provide evidence for this claim.