Abstract:

Institutions, in the broadest sense, create the defining framework in which economic activity takes place. When imbalances occur in the formation, evolution and perception of the framing institutions, the citizens become inclined to construct and resort to alternative, informal linkage mechanisms. This paper explores, in a tentative manner, this connection between institutional failures and employment dynamics.
The study of institutions is generally labeled as institutionalism, and it concerns a wide array of researchers, mainly political scientists and economists. The theoretical understanding of what institutions are is in broad agreement across different disciplines. Within the economic study there is a bifurcation between the original stream of institutional economics and what has come to be called new institutional economy (NIE). As opposed to the heterodox approach of institutional economics, NIE reconciles the study of institutions, as central to economic interactions, with the premises of the mainstream economic tradition (Coase 1998).