The Impact of Institutions on Economic Growth: The Case of Transition Economies

摘要

Economic transition, a phenomenon that has marked the development of the bigger part of Europe in the past decade, is above all a problem of coordination. Economic transition is a process of institutional change, a process of building new institutions required by a capitalist economy. Transition brought about the overnight destruction of the socialist coordination mechanism, while the market coordination took time to be established and agents had to become cognizant of it. The aim of this paper is to analyze the importance of institutional quality for economic performance in transition economies in the past decade. The structure of the paper is as follows. First, we present the results of analyses by other authors which deal with the importance of institutional quality for economic performance in general or for transition economies. Then, some institutional and economic characteristics of socialist economies are briefly presented, and these initial conditions are contrasted with the present situation to provide an illustration of how institutions might have contributed to transitional success or failure. This is followed by a more in-depth econometric analysis intended to isolate the influence of institutional quality on economic performance. Finally, the results are tested with a sensitivity analysis to confirm the importance of the speed and quality of institution building in the transition process.