l J.R. Hicks has suggested that growth theory and development economics have no connection. This view wculd seem to be invalid in view of Hicks' own criteria. See A.O. Krueger. 2 See articles by Irma Adelman and Cynthia T. Morris, Dale W. Jorgenson, Gustav Ranis and J.C.H. Fei, and v.w. Ruttan. ' I skill, knowledge and capacity embodied in a country's population. Al though this ' is clearly an oversimplification it does represent a substantial advance • over the earlier emphasi s on a single key or strategic factor. 4 Our analysis indicates that the three broad Cc;¼._ tegories ,• outlined above account for approximately 95 per cent of the differences in labor productivity in agriculture between a reP,r~s. ent,ati v.e group • of Less Level oped Countrias (LDC' s) ' and of Developed Countries (DC's). In this compari~on the th_ ree factors are of roughly equal importance. When. co~pared to th.e DC' sr•• of recent settlement ( Australia_ , Canada,. N53w Zealand, and the United States) favorable resource endowments account for sbmewhat more than one-third of the diffe-Tences •. 3 See Hayami and associates. 4 See studies by Zvi Griliches, A

Toward a Theory of Induced Institutional Innovation** by Vernon ~v. Ruttan and Yuj iro Hayami* In this paper we elaborate a theory of institutional innovation in which changes in the demand fot institutional innovation are induced by changes in relative resource endowments and by technical change. We illustrate, from agricultural history, how changes in resource endowments and technical change have induced changes in private property rights and in the development of non-market institutions. We also consider the impact of advances in social science knowledge and of cultural endowments on the supply of institutional change. In a final section we present the elements of a model of institutional innovation that maps the relationships among resource endowments, cultural endowments, technology, and institutions.

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