Examples Of Good Economic Institutions

What are good economic institutions, why do so many developing countries lack them, and what can developing countries do to get them. Justify your answer

1. What are good economic institutions?

Economic institutions- these are the laid down policies/ rules or norms in an economy which affect adversely affect a country's economic growth. The policies laid down are backed by the country's constitution.

Good economic institutions- are those with policies/ rules that are enacted with the aim of reducing poverty and enhancing economic development. The growth process begins when reforms and policies that are made and agreed upon, and they open new opportunities for profitable investments, thus creating favorable conditions for investment and innovation.

It is, however, perennially subject to crises, low growth rates, and eventual long-term stagnation, as was the case in Latin America in the 1980 and 1990s. It speeds up at times, indicating the presence of a national development strategy; at others, it becomes quasi-stagnant, because the previous strategy has become exhausted and the country was unable to replace it, or because the country got subordinated to its competitors.

e) Institution that embrace democracy

In modern democracies, the state is the nation's instrument of collective action, and the government, the body of people – of elected officials and high-ranking bureaucrats –who rules it in name of the citizens. The strategic nature of economic development arises from the need and opportunity of a nation to organize efforts in order to raise living standards, and from the high correlation between economic growth and the achievement of other major political objectives. 2. Why do so many developing countries lack

Lack of legal arrangements such as laws and regulations also facilitates the emergence of the informal economy. In these countries where economic freedom has been restricted, regulations about credit and labor markets remained insufficient. In terms of trade policies, a closed look was exhibited for many years, foreign capital has not been granted the necessary importance, hence they were left behind in terms of technological innovation.

The institutions developing countries have usually lack sufficient activity in supporting productive investments and solving the low-efficiency problem. In those societies, legal principles discriminate among individuals, the property rights are not valid for the majority of the population, the elites have unlimited economic and political power, only the lucky citizens can benefit from the quality education, have access to credit and production opportunity. The immaturity of the official institutions performing economic operations increases the cost of doing