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- The concept institutional sclerosis was first introduced by American economist and social scientist Mancur Olson, in his book The Rise and Decline of Nations, published in 1982. Olson argues that the number of interests groups within a society has a sclerotic effect on economic growth. It seeks to explain economic growth and performance of societies across different countries by focusing on the role of institutions - specifically interest groups. This concept formulation builds up on Olson's previous work, the Logic of Collective Action (1965). It sets focus on the problem of , where individuals are driven by social incentives to join collectives in concern of the provision of goods and services. Nevertheless, there are others, who are reluctant to contribute, whilst still benefiting from the input. The Logic thus results in individuals creating and joining smaller interest groups with the goal to prevent the Free-rider problem, as larger groups are more likely to suffer from this phenomenon. The turnout and consequence of this logic will reveal an increase of number of interest groups. This might create a situation of political stability, however Olson argues that these groups are limited to a certain set of interest and activity that will have a static effect on the development of society. Hence, this will create a situation of distributional coalition and rent-seeking behaviour, which will eventually hinder the advancement of technology, accumulation of capital and growth. Additionally, groups will want to remain significantly small in size, to prevent problems of . This means there will be little room and possibility for influence from the outside to adapt to changes and innovation. In general, he notes that societies with a higher number of interest groups are "expected to be less flexible and less innovative". This in turn will result in a sclerotic effect on growth. The conceptualisation of institutional sclerosis has sparked an array of debate among scholars in reference to economic growth. Diverse research has covered a variety of topics, but many have agreed to the fact that Olson will always be most closely connected to interest group formation and their macroeconomic consequences. A recent study on institutional volatility has shown that institutional sclerosis remains to be a concept of relevance in present research on understanding economic growth. It argues that it will be relevant for a country to be in a phase of institutional sclerosis to undergo institutional volatility. (en)
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