World Development Report 2002: Building Institutions for Markets

by World Bank Group

This report is about building institutions that support markets which promote growth and reduce poverty. It analyzes the myriad of institutions--formal and informal, public and private--that people build and use to undertake activities that maximize returns and to manage risk in markets. These
institutions range from unwritten customs and traditions to complex legal codes that regulate international commerce on the cutting edge of technology. Some developing countries have been able to harness such market-supporting institutions to improve the welfare of their people, but others have not
yet achieved the same degree of success. Drawing on a wealth of research and experience from inside and outside the World Bank, this 23rd edition of the World Development Report moves toward a deeper understanding of market-supporting institutions and a better appreciation of how people can build
such institutions.
Building Institutions for Markets takes a two-step approach to institutional development. First, it contends that what is critical is focusing on the functions that market-supporting institutions provide and how they provide it rather than on particular structures. Looking at institutions in terms
of the functions they provide rather than in terms of their structures helps identify institutional gaps. Second, after identifying the institutional gap, the next step is to build the needed institution. The report goes beyond the recognition that one size does not fit all to develop an
understanding of how to think about designing effective institutions in a particular context.
Building Institutions for Markets includes Selected World Development Indicators, an essential reference on recent trends in development. Altogether, the report offers valuable insights and vital guidance for policymakers, researchers, and anyone with an interest in development.

264 pages, Hardcover

First published August 1, 2001

About the author

The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group. The bank is based in Washington, D.C. and provided around $61 billion in loans and assistance to "developing" and transition countries in the 2014 fiscal year. The bank's stated mission is to achieve the twin goals of ending extreme poverty and building shared prosperity. Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank's (the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation and rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, and electricity), large industrial construction projects, and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the country's economy as a whole. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution, or not, such as in the World Bank financed constructions of paper mills along the Rio Uruguay in 2006.