C Hapter 5 T He R Ole of I Nstitutions in E Conomic C Hange

Institutions are systematic patterns of shared expectations, taken-for-granted assumptions, accepted norms and routines of interaction that have robust effects on shaping the motivations and behaviour of sets of interconnected social actors. In modern societies, they are usually embodied in authoritatively coordinated organizations with formal rules and the capacity to impose coercive sanctions, such as the government or the firms. Everyone recognizes that institutions are fundamental to economic change. Nonetheless, despite a resurgence of “institutionalist” thinking inside and outside of economics over the course of the past 25 years, we are still a long way from a satisfying theory of institutions and their economic effects.