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Institutional development in Transition Economies - The role of institutional experience

Eydam, Ulrich and Gabriadze, Irakli (2018): Institutional development in Transition Economies - The role of institutional experience.

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Abstract

We examine the institutional development of a set of transition economies since the dissolution of the USSR, with a particular focus on the effect of natural resource dependency, EU accession and institutional experience. In a cross-sectional analysis these factors show a significant association with the different dimensions of institutional quality. To provide a more comprehensive picture of the development and to control for confounding factors, a Hausman-Taylor estimator on panel data is applied. This analysis confirms the positive relationship between institutional experience and institutional development; moreover, it also confirms the positive effects of the EU accession process on institutional development. Finally, resource dependency, although highly significant in the cross-section, has no significant relationship with average institutional quality in the panel. However, the panel results suggest that resource dependency has a negative effect on the quality of political institutions, while it has no significant association with administrative or legal institutions. Overall, the analysis highlights the persistent nature of institutions and indicates that experience of having independent institutions can affect the pace and path of institutional development.

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