Improving Egypt’s Economic Performance: The Extent of the Market Is Limited by the Costs of Exchange

Author(s): Lee Benham
Publication Number: ECES-WP13-E


This paper suggests a way to characterize the costs of exchange—what individuals have to give up in total resources, including money, time, and goods, to execute a transaction successfully. It also discusses some institutional reforms to lower these costs, and offers some suggestions to policy makers in Egypt. The costs of exchange are imposed by such barriers as: Bad laws, poor enforcement, corruption, administrative discretion, and monopoly practices. Their effect is to inhibit productivity and growth. Systematically collecting and publicizing information about them makes it harder to defend and maintain them.