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Power and Inefficient Institutions

Busch, Lutz Alexander and Muthoo, Abhinay (2003) Power and Inefficient Institutions. Working Paper. University of Essex, Department of Economics, Economics Discussion Papers, Colchester.


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This paper is concerned with the persistence of inefficient institutions. Why are they not replaced by more efficient ones? What and/or who prevents such change? We provide an answer to these questions based on two key ideas. The principal idea is that institutional change on an issue may adversely affect the bargaining power of some agents on different issues. The second is that certain kinds of frictions (or transaction costs) are present, which do not allow for this deteriorating bargaining power to be compensated for. A key insight obtained from our analysis is that, the greater is the degree of inequality in the players’ bargaining powers the more likely it is that inefficient institutions will persist.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Institutional change, bargaining power, transactions costs.
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Users 161 not found.
Date Deposited: 28 Aug 2014 14:21
Last Modified: 28 Aug 2014 14:21

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