DP5718 Institution Building and Growth in Transition Economies

Author(s): Thorsten Beck, Luc Laeven
Publication Date: June 2006
Keyword(s): economic development, institutions, transition economies
JEL(s): O10, P20
Programme Areas: Institutions and Economic Performance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5718

Drawing on the recent literature on economic institutions and the origins of economic development, we offer a political economy explanation of why institution building has varied so much across transition economies. We identify dependence on natural resources and the historical experience of these countries during socialism as major determinants of institution building during transition. Using natural resource reliance and the years under socialism to extract the exogenous component of institution building, we also show the importance of institutions in explaining the variation in economic development and growth across transition economies during the first decade of transition.