Leading scholars examine political, legal, social, and market institutions through a microeconomic lens. The narrative of development economics is now infused with discussions of institutions. Economists debate whether institutions—or other factors altogether (geography, culture, or religion)—are central to development. In this volume, leading scholars in development economics view institutions from a microeconomic perspective, offering both theoretical overviews and empirical analyses spanning three continents. After substantial introductory chapters by Pranab Bardhan and Marcel Fafchamps, two scholars who have published important work on this topic, each of the remaining chapters examines a particular set of institutions in a unique setting. These chapters treat the effects of Angola's violent conflict on that country's development; institutional accountability in Uganda; the effect of Indonesia's ethnic diversity on the distribution of public goods; the impact of trade liberalization on India's investment climate; extended family networks in Mexico; and a microeconomic perspective on land rights in Ethiopia. The chapters demonstrate the remarkable heterogeneity of institutions—policy change is mediated through local market institutions, government institutions, and families—as well as the empirical and methodological ingenuity of current research into this crucial topic. Contributors Manuela Angelucci, Oriana Bandiera, Pranab Bardhan, Timothy Besley, Martina Björkman, Robin Burgess, Giacomo De Giorgi, Stefan Dercon, Marcel Fafchamps, Rajshri Jayaraman, Pramila Krishnan, Eliana La Ferrara, Gilat Levy, Marcos A. Rangel, Imram Rasul, Ritva Reinikka, Jakob Svensson

Leading scholars examine political, legal, social, and market institutions through a microeconomic lens.

Examining a broad spectrum of topics in development economics, this text combines the strength of conventional developmental thought with the insights of contemporary mainstream economics.

In this novel introduction to modern microeconomic theory, Samuel Bowles returns to the classical economists' interest in the wealth and poverty of nations and people, the workings of the institutions of capitalist economies, and the coevolution of individual preferences and the structures of markets, firms, and other institutions. Using recent advances in evolutionary game theory, contract theory, behavioral experiments, and the modeling of dynamic processes, he develops a theory of how economic institutions shape individual behavior, and how institutions evolve due to individual actions, technological change, and chance events. Topics addressed include institutional innovation, social preferences, nonmarket social interactions, social capital, equilibrium unemployment, credit constraints, economic power, generalized increasing returns, disequilibrium outcomes, and path dependency. Each chapter is introduced by empirical puzzles or historical episodes illuminated by the modeling that follows, and the book closes with sets of problems to be solved by readers seeking to improve their mathematical modeling skills. Complementing standard mathematical analysis are agent-based computer simulations of complex evolving systems that are available online so that readers can experiment with the models. Bowles concludes with the time-honored challenge of "getting the rules right," providing an evaluation of markets, states, and communities as contrasting and yet sometimes synergistic structures of governance. Must reading for students and scholars not only in economics but across the behavioral sciences, this engagingly written and compelling exposition of the new microeconomics moves the field beyond the conventional models of prices and markets toward a more accurate and policy-relevant portrayal of human social behavior.

The Institutional Dimension.

This study illustrates the social and political principal that institutions matter. It explores not only how to get institutions to work efficiently, but also how to assess the proper relationship between institutions and development challenges through evaluative techniques.

The Microeconomics of Complex Economies uses game theory, modeling approaches, formal techniques, and computer simulations to teach useful, accessible approaches to real modern economies. It covers topics of information and innovation, including national and regional systems of innovation; clustered and networked firms; and open-source/open-innovation production and use. Its final chapter on policy perspectives and decisions confirms the value of the toolset. Written so chapters can be used independently, the book includes an introduction to computer simulation and pedagogical supplements. Its formal, accessible treatment of complexity goes beyond the scopes of neoclassical and mainstream economics. The highly interdependent economy of the 21st century demands a reconsideration of economic theories. - Describes the usefulness of complex heterodox economics - Emphasizes divergences and convergences with neoclassical economic theories and perspectives - Fits easily into courses on intermediate microeconomics, industrial organization, and games through self-contained chapters