by: World Bank
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Published February 15, 2001 by World Bank; Editions ESKA
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"Institutions fix the confines of and impose form upon the
activities of human beings."
—Walton Hamilton, Institutions, 1932.
The World Development Report 2002: Building Institutions for
Markets undertakes the complex issue of the basic institutions
needed for markets to function properly. This year's World
Development Report goes beyond a simple examination of
institutional structure and explores the functions of institutions.
Recognizing that one size does not fit all, the report asks what do all
institutions which support markets do?
The answer is simple: Institutions channel information, define and
enforce property rights, and increase or prevent competition.
Understanding the functions that current institutions and their
proposed replacements would provide is the first step. The report
contends that once you have identified the institutional functions that
are missing, you can then build effective institutions by following
some basic principles:
- Complement what exists already - in terms of other supporting
institutions, human capacities, and technology.
- Innovate to suit local norms and conditions. Experimenting with new
structures can provide a country with creative solutions that
- Connect communities of market players through open information
flows and open trade. Open trade and information flows create demand
for new institutions and improve the functioning of existing
- Compete among jurisdictions, firms, and individuals. Increased
competition creates demand for new institutions as old ones lose their
effectiveness. It also affects how people behave - improving
These broad lessons and careful analyses, which links theory with
pertinent evidence, are provided in the report. World Development
Report 2002: Building Institutions for Markets contains selected
World Development Indicators.