Nonmarket Institutions

Kaivan Munshi

in Understanding Poverty

Published in print May 2006 | ISBN: 9780195305197
Published online September 2006 | e-ISBN: 9780199783519 | DOI:
 Nonmarket Institutions

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The pervasiveness and persistence of nonmarket institutions in developing economies demand an explanation from economists. This essay describes what has been learned about these institutions: why they emerge, why they persist, the inefficiencies that are associated with their presence, and how the presence of these institutions might affect the design of development policy. These institutions serve a useful purpose when markets function imperfectly. At the same time, the restrictions on individual behavior within these institutions may leave the community ill equipped to respond to a changing world. This, in turn, suggests a role for policy. How external interventions can help move the community out of its traditional equilibrium when the economic environment changes is discussed.

Keywords: developing economies; information; social learning; economic development; imperfect market; community; intervention

Chapter.  4871 words. 

Subjects: Economic Development and Growth

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