Abstract
The “Credibility Thesis” of institutional analysis challenges the assumed relationship between institutional form and performance and argues that institutional forms follow institutional functions. An understudied issue concerns how changing institutional credibility (expression of the function) affects the evolution of institutions (the form). This article highlights the distributive function of institutions and examines how distributional dynamics shape institutional change when the credibility of an institution is problematic. By focusing on a major institutional innovation in China, the evolution of rural land shareholding, this article analyzes a unique distributional dynamic of land benefits that combines central institutional openings with local experiments. When institutional credibility is challenged, this central-local distributional dynamic engenders continuous changes in institutional form. Critically, this endogenous process of institutional change features dynamic disequilibrium rather than static or punctuated equilibrium.
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