Key features of institutions include the following (see also the Inclusive Institutions Topic Guide):
- They are reproduced through routine actions—they live through enactment
- They provide relative certainty and predictability for everyday social, economic and political interactions
- They tend to persist over time but can change incrementally and in rare instances, suddenly
- They are often internalised and unconscious, in that social actors may not even recognize that they are following institutionalized ways of interacting
- They shape behaviour and thus affect developmental outcomes.
Institutions operate in all spheres of life and can affect access to economic, legal, political, and social rights and opportunities (see chapter 3 for a discussion of effects on development outcomes).
Institutions are sometimes confused with organisations. One can think of the differences between them in this way: ‘If institutions can be defined as the “rules of the game”, organisations are how we structure ourselves to play’ (DFID, 2003a, p. ii). Organisations are shaped by institutions, and in turn shape institutional change. Organisations are the material expressions of institutions circumscribed by ‘groups of individuals bound by a common purpose’ (North, 1990, pp. 3, 5; Harper et al., 2012, p. 15).
Institutions can be formal or informal. Formal institutions are the (written) laws, regulations, legal agreements, contracts and constitutions that are enforced by third parties, while informal institutions are the (usually unwritten) norms, procedures, conventions and traditions that are often embedded in culture (Leftwich & Sen, 2010, p. 16). Informal institutions can complement, compete with, or overlap with formal institutions (Jutting et al., 2007, p. 36; Leftwich & Sen, 2010, p. 17). They are implicit and are revealed by investigation of the incentives and norms that drive actors’ behaviours. Whether institutions are relatively strong or weak, or are inclusive or discriminatory, depends upon the context within which they operate (Unsworth, 2010; see also the Inclusive Institutions Topic Guide).
Public sector institutions are the policies, legal frameworks, informal norms and codes of conduct that create the incentives that drive government decision-making, the behaviour of public sector workers, resource allocation – and ultimately the exercise of power within the state bureaucracy.
- The public sector comprises upstream core ministries and central agencies, downstream bodies (including sector ministries, regulators, State-Owned Enterprises and corporate bodies), and non-executive state institutions (including judiciaries, legislatures and Supreme Audit Institutions) (World Bank, 2012).
- DFID. (2003a). Promoting institutional appraisal and development (Guidelines for DFID). London: Department for International Development. See document online
- Harper, C., Jones, N., & Watson, C. (2012). Gender justice for adolescent girls: tackling social institions; Towards a conceptual framework. London: Overseas Development Institute. See document online
- Hodgson, G. (2006). What are Institutions? Journal of Economic Issues, 40(1), 1-25. See document online
- Jütting, J., Drechsler, D., Bartsch, S., & de Soysa, I. (Eds.). (2007). Informal institutions: How social norms help or hinder development. OECD. See document online
- Leftwich, A. & Sen, K. (2010). Beyond institutions: Institutions and organisations in the politics and economics of poverty reduction – a thematic synthesis of research evidence. DFID-funded Research Programme Consortium on Improving Institutions for Pro-Poor Growth (IPPG), September 2010. University of Manchester. See document online
- North, D. (1990). Institutions, institutional change, and economic performance. New York: Cambridge University Press. See document online
- Unsworth, S. (2010). An upside-down view of governance. Brighton: Institute of Development Studies. See document online