The Interplay of Institutions, Trade-offs, Performance and Trends

Where in the previous chapter ‘Why?’ formed the leading question, this chapter focuses on ‘How?’. Chapter 1 examines why a comparative study is worthwhile, why institutions matter, why an analytical approach is useful and why Germany constitutes an important reference country. This chapter presents the analytical framework. It centres on the questions how institutions might affect economic performance and how long-term social, technological, economic and demographic trends influence the relationship between institutions and performance. Formal institutions, i.e. rules, regulations or policies, are the main focus of the study (Box 2.1).