CIRJE-J-156. Okazaki, Tetsuji, "A framework for empirical analysis of institutional change and its applications: Towards understanding institutional change", April 2006.

This paper explains a framework to analyze an institutional change and its applications. The motivation is to see whether an institutional change occurs through changes in the behaviors of the incumbent members of a society, or it occurs thorough a change in the member population. If the latter is the case, it is appropriate for us to understand an institutional change using the evolutionary game theory. Alternatively, if the former is the case, further investigation is needed to see the nature of the behavioral changes. Should they be understood as learning in the sense of evolutionary game, or should they be understood as changes in strategies in the sense of the classical game theory ? This paper presents a framework to decompose an institutional change into some factors representing a change in the population and changes in the behaviors. Then, we apply this framework to two cases, a case of the main bank system in postwar Japan, and a case of the corporate organization in the prewar Japanese cotton spinning industry. It was found that a substantial part of the institutional changes in these cases, are explained by changes in the firm populations, which implies that at least in some cases the evolutionary game approach is valid for understanding institutional changes.