Scandinavian Working Papers in Economics

EIJS Working Paper Series,
Stockholm School of Economics, The European Institute of Japanese Studies

No 160: INSTITUTIONAL TRANSITION AND TRANSITION COST: A METHODOLOGICAL CONSIDERATION

Jang-Sup SHIN
Additional contact information
Jang-Sup SHIN: National University of Singapore, Postal: Department of Economics, National University of Singapore, Tel: (65) 7735174, Fax: (65) 7752646, , ecssjs@nus.edu.sg ,

Abstract: This paper attempts to explain why institutional changes, whose direction look obvious at the beginning, arouse controversies and, more often than not, face ‘setbacks’. It starts from critically assessing North’s (1981; 1990) analysis of relating transaction cost and economic performance and argues for considering ‘transition cost’, separately from transaction cost, in designing institutional change. The ‘reformers’ are often interested in possible transaction cost reducing effect of institutional transition. But an institutional transition can be justified only if the reduction in transaction cost more than compensates for transition cost involved. It seems that many institutional reforms face problems because they ignore or underestimate the aspect of transition cost, the size of which is specific to institutions concerned.

Keywords: Institutional change; transaction cost; transition cost; economic reform

JEL-codes: L50; O10; O53; P00

25 pages, October 1, 2002

Full text files

eijswp0160.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Nanhee Lee ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:31:49.