Proponents of New Institutional Economics claim, among other things, that NIE forms the basis for a new theory of development financing. This article explains the differences between neo-institutional approaches and other theories of development financing. It shows that there is a link between the modelling assumptions of neo-classicism in general and NIE in particular and a correspondence between the two in their understanding of institutions and their recommendations of institutional reforms. A number of conclusions are drawn for the orientation of official development co-operation.
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