Evaluating the role of various political bodies and institutions in the country’s overall economic performance is easier said than done. There are many aspects that have shaped our national institutions and the way how our economy stands today such as deep-rooted, long-standing social and political challenges.

Likewise, political institutions that are set in two countries could impact their respective economy in more ways than one. Not only that, institutions that have different political views may lead their nation to a similar economic performance. So what could be accounted for these distinctive and inconsistent results? What’s the effect of a political institution towards current economic performance?

Open Your Eyes

It’s been shown already on various economic institutions similar to:

  • Property rights
  • Institutions for macroeconomic stabilization
  • Regulatory institutions
  • Institutions for social insurance and;
  • Institutions for conflict management

Not to mention, economic institutions have a decisive influence on the investments for human and physical capital, industrial production and technology.

It is well understood as well that aside from having critical part in economic growth, economic institutions are an imperative source for distribution.

Because of that, there are individuals or groups that are actually taking this to their advantage with the set of preexisting economic conditions as well as resource allocation. Simply put, economic institutions are reflecting continuous conflict of interests towards numerous individuals and different groups over preferred distribution resources and economic institutions.

Where our Economy is at?

Furthermore, current institutional structure of the economics largely depends on allocation of the political power among leaders and elite groups. Political institutions whether it is informal or formal is determining both the incentives and the constraints that are dealt by the key players in the society. Provided the endogenous feature of the political institutions as well as strategic distribution of power, the chosen institutions should help in the development of systems that are credible and has integrity in eliminating risks of any opportunistic behavior of economic and political key players. To make it simple, political institutions must give incentives for politicians for it to be followed and be recycled.

Striking Balance in Political Power

Then again, political institutions are of significant topic for the growth of economy especially in low-income countries. To be specific, the longer the same leaders stay in power, it causes more fragmentation in the party system. Also, the more parties in governing coalition and party-centered electoral system, the smaller the economic growth is going to be in low-income or developing countries. There should be a fair trade especially among small businesses like studios doing mother daughter tattoos, offices and the likes to balance power and maintain growth and development in an economy.