Abstract

This paper starts from the description of the concept and importance of institutions. Then it takes American Westward Movement as an example to illustrate in details about the relationship between institutions and economic development as well as the significant influence that institutions exert. After analyzing the current institutional obstacles (the lagged-behind government functional system and market system, and the super sticky institutional change) that stand in the way of the Western Development Program in China, this paper finally puts forward several practical approaches to improve this situation according to the theory of system innovation. (The additional statistical analysis better proves that the innovations on institutions did improve the average standard of living and comfort level of local citizens.)

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