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Institutions as the Driver of Economic Growth in Classic, Neoclasic and Endogenous Theory

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Listed:
  • Cvetanović Slobodan

    (University of Nis, Faculty of Economics, Republic of Serbia)

  • Mitrović Uroš

    (University Union - Nikola Tesla, Faculty of Sport, Belgrade, Republic of Serbia)

  • Jurakić Marko

    (PhD student, University Educons, Faculty of Business Economy, Sremska Kamenica, Republic of Serbia)

Abstract

The research in this paper focuses on the perception of institutions as the drivers of economic growth. A critical presentation of the views of classical, neoclassical and endogenous growth theorists on this issue is given. It was pointed out that the classical economic theory presented in the works of Smith, Ricardo and Malthus implies the importance of the existence of an appropriate institutional framework for initiating economic growth. The attitude of the classics is that the state can stimulate economic growth through various measures aimed at building quality institutions. On the contrary, the neoclassical growth theory has completely neglected the treatment of institutions in the analysis of economic growth. Institutions as drivers of economic growth are not taken into account in the Robert Solow’s model. However, broadly speaking, it can be assumed that the impact of institutions on the initiation of economic growth is embedded in the category of residuals and the premise of the existence of a high substitution of production factors. But, this fact, even from a distance, does not call into question the general conclusion about the unacceptable neglect of the importance of institutions in explaining the physiology of economic growth by neoclassicists. Finally, the paper emphasizes the fact that only with the emergence of an endogenous growth theory, the question of the underdevelopment of the institutions as an important model of slow economic progress of certain countries is explored. Unfortunately, the developed theoretical models of growth, which include institutions as a full concept, still do not exist in the endogenous theory of economic development.

Suggested Citation

  • Cvetanović Slobodan & Mitrović Uroš & Jurakić Marko, 2019. "Institutions as the Driver of Economic Growth in Classic, Neoclasic and Endogenous Theory," Economic Themes, Sciendo, vol. 57(1), pages 111-125, March.
  • Handle: RePEc:vrs:ecothe:v:57:y:2019:i:1:p:111-125:n:7
    DOI: 10.2478/ethemes-2019-0007
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    References listed on IDEAS

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    1. Brian Snowdon & Howard R. Vane, 2005. "Modern Macroeconomics," Books, Edward Elgar Publishing, number 3092.
    2. Dani Rodrik, 2006. "Institutions for High-Quality Growth: What They Are and How to Acquire Them," Chapters, in: Kartik Roy & Jörn Sideras (ed.), Institutions, Globalisation and Empowerment, chapter 2, Edward Elgar Publishing.
    3. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
    4. Walter Eltis, 2000. "The Classical Theory of Economic Growth," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-0-230-59820-1, December.
    5. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    6. Walter Eltis, 2000. "The Classical Theory of Economic Growth," Palgrave Macmillan Books, in: The Classical Theory of Economic Growth, edition 0, chapter 9, pages 310-338, Palgrave Macmillan.
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    More about this item

    Keywords

    institutions; economic growth; drivers of economic growth; models of economic growth; classical theory; neoclassical theory; endogenous growth theory;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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