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The term economic institution is used in economics to refer to arrangements and structures that make up the environment within which economic activity takes place, such as competitive markets, property rights and so on. Political institutions, such as regime type (democracy, autocracy), are also important because they determine the way in which economic institutions function.
It is a widely recognised fact that economic institutions are a major factor influencing economic growth and development. Economic institutions, such as property rights, are critical for development for at least two reasons:
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