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Institution building and growth in transition economies

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Beck, Thorsten
Laeven, Luc

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Abstract

Drawing on the recent literature on economic institutions and the origins of economic development, the authors offer a political economy explanation of why institution building has varied so much across transition economies. They identify dependence on natural resources and the historical experience of these countries during socialism as major determinants of institution building during transition by influencing the political structure and process during the initial years. Their empirical analysis shows that countries that are more reliant on natural resources and spent a longer time under socialist governments are more likely to see former communists remain in power and to start the transition process with less open political systems, with negative repercussions for the development of market-compatible institutions. Using natural resource reliance and the years under socialism to extract the exogenous component of institution building, the authors also show the importance of institutions in explaining the variation in economic development and growth across transition economies during the first decade of transition.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3657.

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Date of creation: 01 Jul 2005
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Handle: RePEc:wbk:wbrwps:3657

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

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  2. Crafts, Nicholas & Toniolo, Gianni, 2008. "European Economic Growth, 1950-2005: An Overview," CEPR Discussion Papers 6863, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Francesco Caselli & Nicola Gennaioli, 2007. "Economics and Politics of Alternative Institutional Reforms," NBER Working Papers 12833, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Ethan Kapstein & Nathan Converse, 2006. "The Economics of Young Democracies: Policies and Performance," Working Papers 85, Center for Global Development. [Downloadable!]
  5. Josef Falkinger & Volker Grossmann, 2005. "Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites," IZA Discussion Papers 1756, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Garbis Iradian, 2007. "Rapid Growth in Transition Economies: Panel Regression Approach," IMF Working Papers 07/170, International Monetary Fund. [Downloadable!]
  7. Guriev, Sergei & Rachinsky, Andrei, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," Working Papers RP2006/120, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  8. Danne, Christian, 2009. "Commitment devices, opportunity windows, and institution building in Central Asia," MPRA Paper 16597, University Library of Munich, Germany. [Downloadable!]
  9. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective Membership and Institutional Change in Transition Countries," Kiel Working Papers 1562, Kiel Institute for the World Economy. [Downloadable!]
  10. Thorsten Drautzburg & Inna Melnykovska & Rainer Schweickert, 2008. "Which Membership Matters? External vs. Internal Determinants of Institutional Change in Transition Countries," Kiel Working Papers 1421, Kiel Institute for the World Economy. [Downloadable!]
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  13. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective NATO or EU Membership and Institutional Change in Transition Countries," Ruhr Economic Papers 0131, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  14. Kapstein, Ethan & Converse, Nathan, 2006. "The Economics of Young Democracies: Policies and Performance," MPRA Paper 553, University Library of Munich, Germany. [Downloadable!]
  15. Chong, Alberto & Gradstein, Mark, 2006. "Imposed Institutions and Preferences for Redistribution," CEPR Discussion Papers 5922, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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