Handbook of Regional Growth and Development Theories
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Handbook of Regional Growth and Development Theories

Edited by Roberta Capello and Peter Nijkamp

Regional economics – an established discipline for several decades – has gone through a rapid pace of change in the past decade and several new perspectives have emerged. At the same time the methodology has shown surprising development. This volume brings together contributions looking at new pathways in regional economics, written by many well-known international scholars. The most advanced theories, measurement methods and policy issues in regional growth are given in-depth treatment.
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Chapter 22: Institutions and Regional Development

T.R. Lakshmanan and Kenneth J. Button


T.R. Lakshmanan and Ken J. Button 22.1 Introduction Institutions have long been recognized as important in shaping economic development, but until comparatively recently the amount of analytical analysis refining the exact linkages has been comparatively limited. There had been a tendency in the past for political scientists, sociologists, economists and geographers, such as Veblen, Kenneth Galbraith and Fagg Foster to describe institutions and critique conventional analysis that did not adequately embrace them. The peculiarities of institutional structures, their dynamics, and roles at the regional level tended to be treated either implicitly in more generic analysis or as particular, and special, features of individual regional case studies. Indeed, the definition of institutions and boundaries to institutions were ill-defined. This has changed, with institutional analysis within disciplines such as economics, and most notably the new institutional economics as developed by Coase, Oliver Williamson and Matthews, embracing the need to place markets within their institutional context and within a more complete analytical context.1 Institutions are now seen as comprising a set of formal and informal rules, including the conditions of their enforcement. Douglass North (1994) views institutions as made up of formal constraints (rules, laws and constitutions), informal constraints (conventions, norms and self-imposed codes of conduct) and their mechanisms of enforcement. By defining and delimiting the set of options available to individuals, institutions can reduce uncertainty, simplify action choices, and offer an incentive structure for activities and interactions among economic agents.2 Institutions not only define the range...

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