The Role of Institutions in Economic Growth

Domen Zavrl

THE ROLE OF INSTITUTIONS IN

ECONOMIC GROWTH

The Role of Institutions in Economic Growth

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Institutions are seen as the systems, schools of thought or prevalent actions that are core to people’s habits or customs in a society.

They can be formal or informal, and their overarching goal is to ensure the wellestablished procedures meet the needs of the people.

INSTITUTIONS BRING SEVERAL benefits. For starters, an institution has a purpose that seeks to satisfy the needs of society. It also tends to become a unified structure, carries a set of values, and is relatively permanent. These values form a code of conduct that those within the society are expected to adhere to.

INSTITUTIONS PLAY A central role in the social and economic growth of a country.

They set the conditions for development and help determine the attitudes that people embrace in the pursuit of progress.

Where institutions encourage people to go after available opportunities and work hard to achieve their goals, the result is economic growth and development that leads to better standards of living.

HOWEVER, WHERE INSTITUTIONS fail to inspire and motivate people, economic development is greatly hampered. In the absence of an atmosphere that encourages development, progress is hard to come by.

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