Regional Economics: Theory and Practice

Internalization of institutions as economic inducement

Vol. 16, Iss. 2, FEBRUARY 2018

Received: 6 December 2017

Received in revised form: 12 December 2017

Accepted: 20 December 2017

Available online: 15 February 2018


JEL Classification: A12, D02

Pages: 311–322

Shcherbakov I.V. Samara State Transport University, Samara, Russian Federation

ORCID id: not available

Subject This article explores the internalization of existing institutions as independent economic incentives from the standpoint of the new institutional economic theory and psychological concept of self-determination.
Objectives The article aims to establish the main directions to enhance the motivation of the individual's economic activity by increasing internalization of such a stimulus as the institution.
Methods For the study, I used methodological tools of the new institutional economics. Large and small groups, market and non-market rules of resource allocation, and the dominance of formal and informal rules are used to study the internalization of institutions.
Results The article defines the main directions of enhancing internalization of the current norms and rules aimed at increasing the motivation of the individual's economic activity. The article explains and justifies the ratio of market (non-market) and formal (informal) rules and regulations, which should prevail in small or large groups to increase their internalization.
Conclusions and Relevance Internalization of institutions gets achieved when individuals share and accept the existing institutional requirements as their own. By internalization level, the institutions take an intermediate position between wages and the specification of property rights. The results obtained can be used to improve institutions both in society at large and at the regional level.

Keywords: institution, internalization, motivation, economic incentives, transaction costs


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