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How do maternity leave and discriminatory social norms relate to women's employment in developing countries?

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The vast majority of developing countries still lags behind the ILO standard (14 weeks) for the duration of maternity leave.  In some countries social norms and policies converge to create a double discrimination: on one side, women are discriminated at the family level, while on the other side, governments do not support the cost of maternity leave.  Government-funded maternity leave has a greater positive effect on women's employment outcomes in countries with higher levels of discrimination. Increasing women's participation in paid employment is a fundamental step towards women's economic empowerment and improving development outcomes. The benefits of increasing women's labour force participation extend well beyond improving the economic status of women themselves. Gender inequality in labour force participation has a significantly negative impact on economic growth (Klasen and Lamanna, 2009) and conversely, increasing women's labour force participation is a driver of economic growth. Therefore, understanding the determinants of women's employment outcomes, and in particular female labour force participation is, important not only to tackle persistent gender gaps but also to enhance economic growth and accelerate progress on development goals (OECD, 2012). The role of family policies such as maternity leave as a factor shaping women's employment outcomes has been examined for advanced economies, but rarely for developing countries. Yet, as policy-makers are increasingly introducing interventions support women's economic participation in developing countries, family policies are an emerging area of research focus. At the same time, discriminatory social institutions – defined as laws, social norms and practices that restrict or exclude women and girls from opportunities and resources -have gained currency as a framework for understanding the barriers to women's economic participation. Previous OECD Development Centre research has found social institutions that discriminate against women as a key factor explaining women's employment outcomes. What is not yet understood is how discriminatory social institutions and family policies interact to influence women's employment outcomes.
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... At the macro-level, the literature highlights the role of social norms including the norms with respect to the maternal body. Social norms partially set the parameters of what decisions, choices or behaviours are considered acceptable or unacceptable in society and therefore play a key role in defining and influencing gender roles and relations (Cerise, Eliseeva, Francavilla, Mejia, & Tuccio, 2013). Social norms point out that women, mainly after having given birth, are very likely to reduce their work volume (Ruitenberg, 2014). ...
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This study examines the identity transition of women when they become mothers and return to work. Twenty-two first-time mothers were interviewed at two points in time: just after giving birth and on re-entry into employment after maternity leave. The findings suggest that this transition is influenced by multiple factors on different levels which include individual factors, such as partner support and career aspirations, organisational factors such as family-friendly work practices and role models, and societal factors such as social norms and attitudes towards the maternal body. The findings highlight the importance of context by stressing the interrelated nature of factors on micro-, meso- and macro-level in order to better understand the identity transition to motherhood.
... Paid maternity leave not only serves to preserve the health of a mother and her newborn, but it also provides a measure of job security guaranteeing that women of childbearing age have access to jobs and maintain their wages and benefits during maternity. Using 2010 data on female labour force participation and the 2012 Social Institutions Gender Index (SIGI), Cerise et al. (2013) estimate a linear regression model for understanding how women's employment is related to maternity leave and discriminatory social practices. They found that government-funded paid maternity leave has a greater positive effect on female employment in countries with higher levels of discriminatory social practices such as in Africa allowing children from poor households to begin primary education on a more equal footing with those from rich homes. ...
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From the Universal Declaration of Human Rights, 68 years ago, to the Millennium Declaration 15 years ago, and to the Sustainable Development Goals today, global attention remains focused on promoting human rights and eliminating discrimination and inequitable outcomes for women, men, girls and boys. However, despite widespread recognition of women’s rights and the benefits that accrue to all of society from equitable treatment and access to resources and opportunities for women and men, inequalities persist. At the regional and national levels, there is growing recognition that as African women attain higher measures of economic and social well-being, benefits accrue to all of society; despite this growing understanding, removing inequalities for women has not kept pace. Significant gaps between men’s and women’s opportunities remain a major challenge and a severe impediment to structural economic and social transformation that is still the goal of all African countries. The evolving development landscape – with its emerging opportunities, vulnerabilities and shocks – makes it imperative for Africa to accelerate the advancement of sustainable and equitable human development. This can be achieved by building economic, social and environmental resilience for women and men, enhancing their productivity, and accelerating the pace of structural economic transformation in the region. This report explores where and how progress in gender equality has been made and how best to accelerate the pace of gender advancement in Africa. Its focus on gender equality comes at a time of tremendous change across the continent, including recent dynamics of social and economic transformation that have resulted in significant strides in Africa’s human development. Overview This report pinpoints the intersection between political and economic processes, and presents a clear agenda for action. The agenda provides an approach to help African countries more forcefully confront the challenge and accelerate progress on gender equality and women’s empowerment. The agenda on gender equality can support progress toward Africa’s Agenda 2063 and the Sustainable Development Goals (SDGs). While SDG 5 focuses specifically on gender equality, addressing gender issues more vigorously and comprehensively will expedite efforts by governments and other stakeholders to achieve many, if not all, of the other SDGs due to the role and position that women play across all of society and all sectors. Analytical approach From UNDP’s perspective, gender inequality from the standpoint of human development is addressed by improving women’s capabilities and opportunities, and contributing to better outcomes for present and future generations. The nexus between gender equality and human development is based on three overlapping concerns: • economic: more productive work at home and in the marketplace as employers, employees and entrepreneurs; • social and environmental: better health, education, cessation of physical and sexual violence against women, and sustainable resource use for present and future generations; and • political: more equal voice and representation in decision-making and resource allocation. The analytical approach taken in the report is to examine the challenge of gender equality by pinpointing the interaction between political, economic and social processes that either impede or contribute to advancing women’s empowerment. A ‘political economy’ perspective is used to understand the way ideas, resources and power are conceptualized, negotiated and implemented by different social groups in relation to gender inequality – whether in the workplace, the marketplace, or at home. It is important to emphasize that the preparation of this Africa Human Development Report was a highly collaborative effort between the UNDP Regional Bureau for Africa and many different agencies, institutions, practitioners and researchers. It was also prepared in close collaboration with the African Union Commission. As a result, it not only focuses on sub-Saharan Africa, but also includes the Arab states of North Africa. The report preparation process included in-depth quantitative research and analysis, a qualitative interactive study, consultations with numerous organizations throughout Africa as well as an Africa-wide online survey. The sections below highlight some of the key points found in the chapters of the report. Progress and challenges in African human development The report reviews current progress in African human development using the different indicators that UNDP has constructed to capture various aspects of human development, including gender inequality. Using UNDP’s different human development indicators, there is wide variation in values and ranking across the African region and between the different African sub-regions. Overall, Africa has one of the fastest rates of improvement in human development over the past two decades but also has the lowest average levels of human development compared to other regions in the world. At the same time, not all African countries have low human development. Seventeen African countries across the five sub-regions have attained medium and high human development – five countries each from Southern and North Africa, four in Central Africa, two in West Africa, and one in East Africa. The highest human development levels in Africa are in Algeria, Libya, Mauritius, Seychelles, and Tunisia. Thirty-six African countries (out of 44 countries worldwide) are classified in the low human development group. Countries with initially low levels of human development are making large gains. The following countries have made the largest gains since 2000: United Republic of Tanzania, Burundi, Mali, Zambia, Niger, Angola, Sierra Leone, Mozambique, Rwanda and Ethiopia. Countries that began with initially low levels of human development are growing faster, on average, which indicates that they are catching up. However, the pace has slowed since 2010. Calculations using the UNDP gender indices indicate significant gender inequality in almost every African country. Gender gaps in income and non-income dimensions mean that women often experience lower human development outcomes than men. On average, African women achieve only 87 per cent of male human development levels. Social dimensions of gender equality The social dimensions of gender equality involving trends in health and education are key determinants of women’s equality and empowerment. Overall, gender inequality in social services translates into fewer opportunities for women, in particular, and society, as a whole, to achieve well-being. During the last decades, many African countries have seen the expansion of their citizens’ capabilities in the basic areas of health, education and other social services. These improvements have included women and girls, and today they have greater access to education at all levels, have better health, safely give birth to their children, and achieve higher life expectancy. Yet, many women face severe deprivations in their health due to such factors as early age marriage, sexual and physical violence, and the continued unacceptable high incidence of maternal mortality. The spectrum of violence affecting women includes domestic violence, intimate partner violence, rape, genital mutilation, intimidation, and additional threats to women´s personal security in periods of war and conflict. With respect to education, it is remarkable that near gender parity has been achieved in primary school enrolment. However, gender discrimination is still significant in secondary and tertiary education. The reasons why children do not attend school vary, but they are often associated with poverty, ethnicity, social exclusion, living in a rural area or slums, geographic remoteness, disasters, armed conflict, lack of basic facilities and poor-quality education. These barriers often interact with gender to create even greater disadvantages in learning opportunities. Women in African economies Another key determinant of gender equality is defined by women in the workplace and economic decision-making. Significant economic and workplace disparities between men and women continue to be the norm rather than the exception in many African countries. These inequalities are found across Africa in terms of access to economic assets, participation in the workplace, entrepreneurship opportunities, and use of and benefits from natural resources and the environment. In addition, women are more likely to be found in vulnerable employment with weak regulation and limited social protection due to differences in education and the mismatch between women’s skills and those demanded by the labour market. This in turn pushes women into the informal economy. It is estimated, using survey data for 2004 to 2010, that the share of non-agricultural informal employment in sub-Saharan Africa is about 66 per cent of all female employment. Increased female participation in the labour market has not meant increased opportunities in high paying jobs or enterprises. A gender wage gap outside agriculture is pervasive across all labour markets in sub-Saharan Africa, where, on average, the unadjusted gender pay gap is estimated at 30 per cent. Thus, for every $1 earned by men in manufacturing, services and trade, women earn 70 cents. Gaps in earnings between women and men are influenced by parameters such as age, occupation type, education, parenthood and marriage. Because social norms and beliefs assign African women and girls the primary responsibility for care and domestic work, women, on average, spend twice as much time as men on domestic work - child and elderly care, cooking, cleaning, and fetching water and wood. In sub-Saharan Africa, 71 per cent of the burden of collecting water for households falls on women and girls. As the economic status of women improves, so does the economic status of entire families – a major factor in reducing the blight of inter-generational poverty and low human development. For example, ownership or title to land represents an important source of equity and collateral for women in obtaining credit and accessing other forms of productive assets. Lack of access to land deprives African women of an important economic tool for improving their livelihoods. There is a high economic cost when women are not more fully integrated into their respective national economies. Gender inequality in the labour market alone cost sub-Saharan Africa about USD 95 billion annually between 2010 and 2014, peaking at USD 105 billion in 2014. These results confirm that Africa is missing its full growth potential because a sizeable portion of its growth reserve – women – is not fully utilized. African women in politics and leadership Another key driver in advancing gender equality is the role of women’s political voice and leadership. Women’s political participation and representation in governance have long been taken as key indicators of the general level of public sector effectiveness and accountability in a country. When more women are involved in politics and leadership positions, women’s rights, priorities, needs and interests are less likely to be ignored or silenced. Significant progress has been made in advancing women’s participation in holding elective office and in positions of leadership in the public and private sectors. Some countries have seen the successful election of women to their parliaments and other elected offices, but existing social and political structures still proscribe women’s full potential in helping to equally shape the national and local economic, social and political agenda. In addition to making progress in politics, women have also made advances in leadership positions in such areas as the civil service, trade unions and the private sector, but here again progress in achieving gender equity is still lagging due to a combination of political, economic and social resistance to change. In the private sector, the general perception that male enterprises out-perform female ones is not supported by data nor does it justify the gap in leadership. Although the trend is improving, the percentage of firms with a female top manager still ranges between 7 and 30 per cent. Narrowing the private sector leadership gender gap relies on increasing the pool of women with tertiary education in science and technology-related fields. Peace processes are another principal ground for decision-making and for the exercise of power and influence. However, historically women’s formal participation has been limited despite the profusion of peace agreements across the continent. In the last decade, women’s roles in conflict resolution and peacebuilding have shifted considerably from when women could only informally impact negotiations for cessation of hostilities or peace agreements. There is a growing recognition that women should be an integral and formal part of any peace negotiations process, given women’s role in securing and maintaining peace. The role of legal and social norms in gender equality Existing legal and social norms, and their interactions have a major effect on gender equality and women’s empowerment. The underlying importance of legal and social norms cannot be overstated in such areas as access to economic services, health and education, as well as the role they play in influencing gender-focused violence, childhood marriage and other socio-cultural barriers to gender equality. African states and regional bodies have put in place a wide array of legal norms, precedents and legislation promoting gender equality. The challenge is not in fine-tuning existing legal standards, but rather, in ensuring that standards are advocated, accepted and integrated into national laws and regulations, and then fully implemented and enforced. It is the gap between legal rights and expectations, on the one hand, and prevailing practices and behaviours embodied in social and cultural norms, on the other hand, that pose a fundamental challenge for accelerating gender equality and women’s empowerment. Many social norms have very important and positive roles in creating strong family and community bonds, as well as establishing conditions for trust and support in times of crisis and hardship. Other social norms, however, continue to have a negative impact on the attainment of gender equality, despite existing laws and standards. Such prevailing social norms and gender stereotypes that assign different standings, roles and privileges for women and men prevent progress towards gender equality. About one quarter of Africans did not embrace the concept of gender equality, i.e. they disagreed or strongly disagreed with the fundamental notion of equal rights between men and women. This calls for proactive awareness and advocacy on gender equality in Africa. The impact of social norms that limit women has also been shown to have deleterious effects on men and boys, and communities as a whole, essentially holding everyone back from achieving higher human development and impeding societies from realizing their full development potential. Policy and programme approaches to addressing gender inequality African governments have used a range of policy and programme approaches to address gender inequality. These include broad macro- and sectoral-level efforts that have sought to address gender inequality through a combination of policies and institutions. Examples include fiscal policy (including public expenditures and subsidies), legal and regulatory measures and set-aside programmes, as well as other targeted interventions. But the record of success is mixed, and there is ample room for expanding such efforts, both in scope and scale. In this regard, much can be learned from the experience of Latin America and Asia. Most African countries have followed international practice by setting up institutions for the advancement of women. These new organizational mechanisms for gender issues have taken many forms, including thematic ministries or ministerial departments for women, designated in some countries as lead institutional mechanisms. Developing effective institutional models towards more equal societies must be understood as a shared responsibility across multiple ministries and involving the private sector and civil society. African governments have begun using various kinds of social protection programmes (including cash transfer and subsidies) to promote gender equality and poverty reduction. Still, there is considerable room for expanding a number of cash transfer and social service programmes that would have a direct impact on improving women’s economic and social well-being. These include paid maternal leave, provision of childcare services, and some form of income support or cash transfers for women’s unpaid work, usually taking place in the home or in the farm field. Gender-sensitive reviews of existing legislation in the areas of family law, land law, labour and employment law, and customary law are necessary to identify and remove ongoing gender discrimination. Likewise, the legal environment within which women and men engage in society underscores the fact that more effective non-discriminatory labour institutions, family-friendly policies and work environment standards could contribute greatly towards reducing women’s economic and social disadvantages. In an estimated 28 per cent of African countries, customary law is considered a valid source of law – even if it violates constitutional provisions on nondiscrimination or equality. In order to better apply international and regional legal norms for gender equality, many African countries may therefore need to more fully articulate, implement and enforce existing laws, statutes and regulations that could have a profound impact on improving women’s access to equal rights and entitlements. Reconciling national laws and regulations with customary laws and traditions remains a monumental challenge. An agenda for action to accelerate gender equality The 2016 Africa Human Development Report offers some key conclusions and overriding themes that provide a strategic framework and agenda for action aimed at a more results-oriented and comprehensive approach to addressing gender inequality. Four broad ‘pathways’ are suggested that offer policy and programme guidelines to accelerate gender equality and fully integrate gender into the broader human development agenda and help achieve the Sustainable Development Goals and the African Agenda 2063. Pathway 1: Supporting the adoption of legal reforms, policies and regulations to advance women’s empowerment through the formulation and full implementation of a combination of laws and regulations, policies and programmes that provide equal opportunities for all, regardless of sex. Pathway 2: Supporting national capacities to promote and increase the participation and leadership of women in decision-making in the home, economy and society. In this regard, public and private sector institutions as well as civil society organizations (CSOs) should commit to implementing UNDP’s Gender Equality Seal (GES) in Africa. Pathway 3: Supporting capacity to implement multisectoral approaches to mitigate the impacts of discriminatory health and education practices can generate collaboration across ministries and with the private sector and civil society. Pathway 4: Supporting women to gain ownership and management of economic and environmental assets can help tackle factors that propagate socio-economic exclusion, poverty and inequality. With these four pathways in mind, there is an overriding strategic question facing African governments wishing to accelerate women’s rights and entitlements: Assuming the political commitment to do so, how can African leaders and policy-makers more forcefully address gender inequalities in the face of other competing national priorities? Due to the pressure on leaders and policymakers to maintain the pace of economic growth, diversify the economy for integration into global markets, meet the rising demands of a growing middle class, address shocks and vulnerabilitys and meet national security concerns, policy-makers must take tough and often competing decisions on the use of scarce resources. To provide some policy guidance for African leaders concerned with this ongoing dilemma, six strategic considerations are offered as an organizational framework for action in addressing gender inequality. This organizational framework coincides with the argument put forward that accelerating gender equality and women’s empowerment simultaneously represents a practical operational approach for African governments to tackle the challenge of achieving the SDGs and move forward on the AU’s Agenda 2063. To the extent that gender inequalities are addressed, then, in effect, progress will be made across the wide spectrum of development goals found in the SDGs. Addressing gender equality is not separate from addressing the SDGs. From this perspective, the six strategic considerations are outlined below. Using gender equality as an organizing policy lens for formulation, planning and implementation of the development agenda. It is a false assumption that giving higher priority to gender equality means giving lower priority to other development priorities. Focusing on gender issues is not a zero-sum choice, where choosing one priority comes at the expense of another. Whatever the policy objective – inclusive growth and economic diversification, revitalizing the agricultural sector, improving national health services, eradicating extreme poverty, tackling climate change – if 50 per cent of the population, that is, women and girls, are not benefitting equally from the policies and programmes, then the latter cannot be considered a success. Discarding this false assumption and addressing gender equality is no longer about ‘adding’ in special policies and programmes for women or having separate women’s ministries or agencies, but, instead, ensuring that all policies and programmes are intended to achieve equal outcomes for both men and women. Tackling destructive social norms directly. Reversing the social norms that impede women’s and girls’ equal opportunities will be a long-term and difficult process. Pushing to deconstruct harmful social norms and cultural barriers is no doubt a morally demanding, socially difficult and politically risky course of action, or more precisely, multiple and overlapping courses of actions. African leaders and policy-makers therefore need to understand the long-term nature of deconstructing harmful social norms and replacing them with positive social norms. In many instances, the approach will entail reconciling legal and social norms. Using plans and budgets to prioritize gender equality. African governments will invariably need to identify and then implement a strategic set of policy and programme choices that are deemed priorities in the national context, that have the highest likelihood of making important changes, that can work synergistically, and that have the best chance of being successfully implemented. The objective is to suggest that African governments must have a prioritization process for achieving gender equality given the tremendous needs and resource constraints facing each country. The task does not necessarily entail selecting and implementing a wide range of policy options, but instead, prioritizing, in an orderly and transparent process, among multiple (and often contending) policy options—all of which place competing demands on scarce public resources. Three guiding questions are suggested for linking short- and long-term prioritization: • What policies and programmes have the highest likelihood of improving the lives of women and bringing them into the economic mainstream through productive employment opportunities and improved social welfare? • In what ways are the views and concerns of women, stakeholders and other recipients being factored into the decisionmaking process? • In situations where resources are shifted from one programme or initiative to another, can the shift be justified in terms of improved economic and social outcomes for women and girls than would otherwise have been the case? Strengthening adaptive policies and institutional capacities. Achieving gender equality and accelerating the pace of human development will require African governments to incorporate a commitment to a strong, proactive and responsible social framework that develops policies for both the public and private sectors – based on a long-term vision and leadership, shared norms and values, and rules and institutions that build trust and cohesion. At the same time, governments will need the capacity for flexibility and adaptation. In complex societies such as in Africa, the outcome of any particular policy is inevitably uncertain. African governments will need to follow a governance framework that is pragmatic and able to problem-solve and adapt collectively and rapidly – as opposed to abandoning a course of action in the face of unintended effects. Adding value to data for improved decision-making. For African governments to fully address gender inequalities and understand the outcomes of chosen policies and programmes, more robust data collection and monitoring systems will be required. Effective capacity in statistics and monitoring and evaluation is the ‘lubricant’ by which governments are able to perform as an adaptive state and undertake necessary policy change and mid-course corrections. Data collection and analysis should not be considered an afterthought, but rather a core function of governmental services, which require commensurate financial and political support. Assessing capabilities for monitoring national development plans and budgets, and the SDGs, together with traditional economic and social statistics, is an imperative. This represents a window of opportunity for African governments to evaluate how their statistical agencies and line ministries can improve their data gathering, management and analysis functions in order to fully capture the gender implications of current policies and initiatives, and how, over time, they can be modified and improved. Prioritizing regional and South-South cooperation. It is important to underline the importance of regional and South-South cooperation in designing and implementing gender-focused policies and initiatives. African countries have much to learn from each other – both what has worked and what has not. There are also many useful lessons that can be learned from the Asian and Latin American and Caribbean (LAC) experience. The focus of such cooperation should be on sharing tools, strategies and experiences across sectors, from large infrastructure projects to community-based interventions –upscaling. There is considerable scope for expanding cross-national training and study tours, secondment of staff and other kinds of experiential learning opportunities that place managers and policy-makers more directly in the fulcrum of on-the-ground change. In summary, the report focuses on the continuing problem of gender equality facing African women and girls. A key conclusion is that gender equality is not achieved by having gender-specific ministries or womenonly projects and programmes (although they can be important), but rather, by tackling gender equality as a wide-ranging effort across multiple sectors that engage all segments of society. The report further emphasizes the inter-linkages between the social well-being of women and their economic opportunities for more productive lives. Underpinning all of these efforts will be the necessary but understandably difficult task of breaking down harmful social norms and cultural barriers that have a particularly serious impact on women and their families. Another conclusion is that accelerating gender equality will entail highly collaborative efforts involving not only national and local governments, but also non-governmental organizations, the private sector, advocacy groups and effective community-based organizations. Finally, it will be important for African governments to articulate time-bound benchmarks to measure progress, make adjustments as needed, and maintain a national vision of the important ramifications that achieving gender equality has for the entire society. The peoples of Africa must hold themselves and their governments accountable for making progress on improvements within a sufficient timeframe that does not dilute the urgent need for action. The 15-year timeframe of the SDGs and the first ten-year implementation plan of Agenda 2063 represent a viable timeframe to which African governments have already pledged themselves.
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Childhood, adolescence and early adulthood remain for many girls and young women a period of deprivation, danger and vulnerability, resulting in lack of agency and critical development deficits. What happens at this crucial time in girls’ and young women’s lives can also reinforce their poverty status and that of their offspring, as well as influencing their movement into or out of poverty. In many cases, overlapping experiences of deprivation, foregone human development opportunities and abuse or exploitation perpetuate and intensify poverty for girls and young women over the life-course.Recently – in part because of the child focus of the Millennium Development Goals (MDGs) and the 2007 World Development Report – there has been growing attention on the need to include girls (and boys) more prominently in development agendas. How to do this effectively, however, remains under-researched, especially in debates around chronic poverty, which have in general paid relatively limited attention to gender dynamics.This report addresses this gap by placing girls and young women centre stage, highlighting ways in which five context-specific social institutions inform and determine their life opportunities and agency. Based on the OECD’s Social Institutions and Gender Index (SIGI), these are: discriminatory family codes, son bias, limited resource rights and entitlements, physical insecurity and restricted civil liberties. We discuss the characteristics of each social institution, its gendered dimensions, its linkages to poverty dynamics and its impacts on girls and young women.We balance this with a review of promising policies and programmes aimed at tackling the discriminatory dimensions of these institutions. Social institutions are constantly undergoing change. The process may be slow, uneven and even suffer from reversals in some contexts, but the evidence that we present underscores that positive change for girls and young women is possible, even in the most challenging socio-cultural, political and economic contexts.
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Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
Article
Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)