Different Approaches toward Transaction Costs and their Indications on Iran's Business and Economy Environment

This paper tries to indicate that new institutional economy has various origins and does not have an integrate wholeness. Lack of integraty in new institutional economy is reflected in its approach toward transaction costs; there are two approaches toward transaction costs, one of which focuses on the firm and its relations and the other emphasizes on macro-infrastructures. Considering North’s approach to transaction costs and his emphasis on enforcing contracts, this paper takes contract enforcing costs as an independent variable in Djankov business environment. The paper uses cross-sectional Ordinary Least Squares (OLS) among 115 countries to indicate there is a significant relationship between contract enforcing costs and countries’ economic growth. While business environment models use many variables to explain economic growth, contract enforcing costs variable by itself explains many growth changes. Hence, it could be claimed that contract enforcing cost is the most notable variable among other variables affecting business environment. Eventually, considering the importance of contract enforcing, the paper surveys the status of this indictor in Iran and recommends some solutions to reduce it.