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Institutions and Creative Destruction in CEECs: Determinants of Inefficient Use of Assets

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  • Fidrmuc, Jarko
  • Siddiqui, Martin

Abstract

We analyze the relationship between institutional quality and firm efficiency. Using rich data on firms in the European Union between 2005 and 2012, we show that high institutional quality lowers the share of persistently inefficiently used assets. The adverse effect of low institutional quality may be one of the narrow channels through which institutions affect income per capita in the long-run. Our approach combines institutional economics and Schumpeterian creative destruction. In addition, we observe similarities between inefficiently used assets by European firms and the phenomenon of zombie lending in Japan during the last decades.

Suggested Citation

  • Fidrmuc, Jarko & Siddiqui, Martin, 2015. "Institutions and Creative Destruction in CEECs: Determinants of Inefficient Use of Assets," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113201, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:113201
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    More about this item

    JEL classification:

    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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