NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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A Conceptual Framework for Understanding Critical Transitions

Lee J. Alston, Marcus André Melo, Bernardo Mueller, Carlos Pereira

NBER Working Paper No. 22144
Issued in April 2016
NBER Program(s):Development of the American Economy, Development Economics, Law and Economics, Political Economy

Critical transitions for a country are historical periods when the powerful organizations in a country shift from one set of beliefs about how institutions (the formal and informal rules of the game) will affect outcomes to a new set of beliefs. Critical transitions can lead a country toward more openness politically and economically or toward a more exclusionary society. Economic and political development is contextual; that is, there is no recipe. Periods of relative persistence are the norm with changes in institutions at the margin. We develop a framework consisting of several interconnected relatively unexplored concepts that we first define in a static context and then utilize to show how they produce a dynamic of institutional change or persistence. The key concepts include: windows of opportunity, beliefs, and leadership. Our major contribution is wedding the concepts of windows of opportunity, beliefs, and leadership to the dominant network, institutions, and economic and political outcomes to form a dynamic. We apply the framework illustratively to understand economic and political development in Argentina over the past 100 years.

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Document Object Identifier (DOI): 10.3386/w22144

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