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Institutions and transition: Lessons and surprises


  • Paul Hare

    () (Heriot-Watt University Emeritus Professor of Economics, School of Management and Languages, Edinburgh, UK)


This paper starts with some definitions and concepts to clarify what we have in mind when we talk about economic institutions and the political economy of transition. Much discussion of the area is characterised by ambiguity and confusion, and while there are many partial theories of institutions covering specific cases, we still lack an all encompassing theory. The institutions important for transition are introduced next, this discussion helping to make clear the critical distinction between institutions per se, and the concrete organisational and legal forms through which they are implemented in particular country settings. For those transition economies that have already joined, or wish to join the EU, this includes some remarks on the acquis communautaire. Some empirical evidence on the role of institutions in facilitating transition and fostering post-socialist economic growth is then reviewed, finding support for the rule of law, secure property rights (ownership and business contracts) and liberal trade. As an aside to the main argument, a brief account of possible directions of institutional reform in North Korea is presented. Finally, the concluding section outlines what transition has taught us about the roles of institutions in economic life, and highlights some important unsettled issues, including the problem of embedding new institutions in different cultural settings.

Suggested Citation

  • Paul Hare, 2013. "Institutions and transition: Lessons and surprises," Society and Economy, Akadémiai Kiadó, Hungary, vol. 35(1), pages 1-24, April.
  • Handle: RePEc:aka:soceco:v:35:y:2013:i:1:p:1-24
    Note: Paper presented at Corvinus University of Budapest, Hungary, September 2012; first prepared as a Keynote Address for the EACES Conference 2012, Paisley Campus, University of the West of Scotland, September 6–8 2012. The paper draws heavily on my contribution to the forthcoming edited volume on transition, Handbook of the Economics and Political Economy of Transition, edited by Paul Hare and Gerard Turley, to be published by Routledge in April 2013. In one section, the paper also makes use of some ideas discussed in my recent paper on North Korea, ‘North Korea: Building the Institutions to Raise Living Standards’, paper for a special issue of International Economic Journal edited by Gerard Roland.

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    Cited by:

    1. Gevorkyan, Aleksandr V., 2015. "The legends of the Caucasus: Economic transformation of Armenia and Georgia," International Business Review, Elsevier, vol. 24(6), pages 1009-1024.

    More about this item


    transition economies; property rights; Eastern Europe; political economy;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy


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