Institutions and private sector development

This paper was presented at a conference on the New Institutional Economics, Washington University, St. Louis, September 19, 1997. The author argues that researchers in the new institutional economics have the potential to make significant contributions to improving the business climate in transitioning and developing economies. First, there is a need for researchers to build a shared understanding with the business community, and put the study of institutions that reduce transaction costs into terms business people can easily understand. Second, researchers can focus an the role of mutual trust in promoting economic development. Third, an understanding of institutions can help to improve the investment climate for foreign investors. Finally, the author lists fourteen issues being addressed by policy reform projects that the business sector finds of great interest.