Fachhochschule Köln/Cologne University of Applied Sciences Fakultät für Wirtschaftswissenschaften/Fac. for Economics and Business Administration Claudiusstr.1.
Over the past two decades the mutual importance of institutional economics and development economics has grown strongly. This paper attempts to apply institutional analysis to issues of economic development by analysing China's reform process after her accession to the WTO on the background of the hypothesis of vertically dependent institutions. It will be shown that institutions on a lower level (e.g. a fixed exchange rate regime) are dominated by higher level institutions like (e.g. laws governing firms, financial and labour markets). The latter are dominated by institutions on a higher level, for example by regulations governing the economic and political system. Consequently, economic policy options like a change in the exchange rate regime will depend on adjustments in areas ranging from constitutional to company law.
