Institutional Duality: Understanding the Relationship Between Culture, Institutions, and Underdevelopment

Original and new institutionalist approaches view institutions as the result of a selective and adaptive process of mental habits that perpetuate themselves over time, creating rules and norms that govern interaction between individuals. The original Latin American structuralist theory of underdevelopment provides insights into the structural idiosyncrasies of the periphery from a cultural perspective. By combining these approaches, we seek to understand the reason for the coexistence of advanced and archaic institutional forms of conduct in the capitalist periphery. The article argues that the reason for the existence of this hybrid economic and social phenomenon, here termed institutional duality, is the combination of waves of modernization with the interests of local ruling classes in preserving economic power. While local elites are interested in adopting formal rules similar to those of developed countries to promote surplus generation, they are also interested in maintaining archaic informal norms. This restricts innovation and technical progress, creating disparate economic trajectories between developed and underdeveloped countries.