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World Development Report 2002

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World Development Report 2002: Building Institutions for Markets

Weak institutions-tangled laws, corrupt courts, deeply biased credit systems, and elaborate business registration requirements-hurt poor people and hinder development. According to the World Development Report 2002: Building Institutions for Markets, countries that systematically deal with such problems and create new institutions suited to local needs can dramatically increase incomes and reduce poverty. These institutions range from unwritten customs and traditions to complex legal codes that regulate international commerce.

The report's recommendations to guide policymakers in building more effective institutions include the following:

Complement what exists: The design of any single institution should take into account the nature of the supporting institutions, skills, technology and corruption. Costs of building and maintaining the institution must be commensurate with per capita income levels to ensure access and use.

Innovate: Institutions are not immutable. Be prepared to experiment with new institutional arrangements and to modify or abandon those that fail.

Connect: Connect communities through open information flows and open trade. In particular, the exchange of information through open debate creates demand for institutional change.

Promote competition: Foster competition between jurisdictions, firms and individuals. Competition creates demand for new institutions, changes behavior, brings flexibility in markets and leads to new solutions.

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Background Papers and conference notes
Core Team

The World Development Report 2002 was written by a team led by Roumeen Islam, under the general direction of Nicholas Stern, Senior Vice President and Chief Economist of the World Bank. Core team members included: Arup Banerji, Robert Cull, Asli Demirquc-Kunt, Simeon Djankov, Alexander Dyck, Aart Kraay, Russell Pittman, and Helena Tang.

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Berlin Workshop/Consultation was held February 23-25, 2000, and was divided into 7 sessions. Topics included Defining Institutions and Moving Toward Institutional Change; Competition Policy and Regulation; Governance and Political Institutions; Financial Institutions; Enforcement of Contracts: The Judicial System; Corporate Governance; Social Structure and Social Capital.

A summer workshop/consultation was held July 17-19, 2000, to gather initial input from scholars and researchers. This event, part of a World Development Report tradition, was divided into 10 sessions with speakers presenting brief notes on various aspects of the topics examined in the Report: Institutions and Institutional Change; Markets, Growth, and Poverty: The Role of Institutions; Social Institutions; Regulation Policy; Competition Policy; Financial Institutions; Corporate Governance; Political Institutions; Legal and Judicial Systems.

Consultations were held in London and Paris in October 2000.

In October 2000, a consultation/conference was held in Amsterdam.

In February 2001, consultations were held with ICFTU.

Press Release

- (English, Japanese, Russian, Espanol, Chinese, German, Arabic, French, Portugues)

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