inostrani kapital kao faktor razvoja zemalja - Ekonomski fakultet u ...

contact and they have mutual coordination which results in decreasing problems
with coordination.
Political institutions are institutions that shape the political process, and which
result in creation of formal rules and creation of legal system. These institutions do
not have a direct influence on lowering transaction costs, but they act as
determinants of the quality of economic institutions and they also characterize the
environment for running business. Political institutions determine the production
process of economic institutions.
2.3. Institutions and Economic Development
The previous text reviewed the postulates of the new institutional economy,
the institutions as its basic carriers and the difference between the institutions and
the organizations; it explained the different types of institutions etc. However, the
main objective of new institutional economics are not the institutions only, but
their mutual relations and the influence they have over the economic development.
The question is: ‘What is the transmission mechanism via which the institutions
influence the economic development?’ In order to provide the best possible answer
to this question we are going to refer to the previously explained division of
institutions according to their scope.
Institutions that are responsible for the actual creation of market economy are
directly related with the property rights protection and with the efficient
implementation of contracts, which by itself relates them with the incentives for
making investments and developing entrepreneurship. There are a few significant
aspects regarding this issue, which explain the connection between economic
development and investments on the one hand, and the institutions and property
rights protection on the other hand. Firstly, it is the protection of property rights
that increases investments in machines, in human capital and in technologies;
secondly, the good protection of property rights disables powerful groups to
expropriate income and to claim investments made by other parties as theirs, and
thirdly, the good protection of property rights ensures equal opportunities for
people to invest specially in human capital, which makes them become active
participants in the economic independency of the country.
Institutions that are responsible for government regulation are directly related
with the domains of market failure. In certain spheres of economic activities the
market cannot successfully resolve the problems: the existence of monopolies,
externalities (positive and negative ones), asymmetric information etc. All these
domains are in the need of having government intervention i.e. regulation.
From the other side, institutions that are responsible for market stabilization
should ensure macroeconomic stability as the basic assumption for sustainable
development. These institutions, mainly speaking about the budget and the central
bank, are responsible for rational government with the aggregate demand, for
alleviating the consequences of economic cycles (recessions and expansions), for
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