Institutions and Economic Performance

Institutions are the rules, laws, and organizations that govern how a society functions—think of courts, property rights, or regulations. Economic performance refers to how well an economy produces goods and services, creates jobs, and improves living standards. Strong, fair institutions promote trust and stability, encouraging investment and entrepreneurship, which boost economic growth. Conversely, weak or corrupt institutions can hinder progress, leading to slower growth or inequality. Essentially, good institutions create an environment where economic activity can thrive, directly influencing a country's prosperity and development.