PROPERTY RIGHTS AS FORMAL INSTITUTIONAL DETERMINANT OF ECONOMIC DEVELOPMENT IN SELECTED CENTRAL AND SOUTH-EUROPEAN COUNTRIES
Date Issued
2017
Author(s)
Shapkova Kocevska, Katerina; Nedanovski, Pece
Abstract
The treatment of institutions as important determinant of economic prosperity in the
countries around the world is not a novelty in economic literature. In the past few decades,
examination of this topic has had considerable progress presented by increased interest in
research and published work concerning understanding and definition of institutions, creating
different classifications of institutional arrangements and evaluation of their impact on
economic development, trade and investment. Douglas North, Oliver Williamson, Elinor
Ostrom, Daron Acemoglu, Simeon Djankov, Steve Pejovich are a few of the scholars who have
succeeded in their efforts to make institutional economics a separate discipline in economic
science.
By employing different criteria, many classifications of institutions have been made. In this
presentation, the authors start from one of the most common classification of the institutions:
formal versus informal institutions. By formal institutions, the formal rules of the game are
assumed such as property rights, contracts, constitutions, conventions and laws. Informal
institutions, on the other hand, represent the informal constraints of human behavior usually
presented by different norms, values, language, customs, traditions etc.
New institutional economics (NIE) places protection of private property and well defined
property rights as one of the basic pillars of market economies. These formal institutions can
be beneficial for economic prosperity in many ways. Stable and predictable institutional
environment where ownership rights are respected and contracts are enforced stimulates the
economic growth. These institutional arrangements have specific and predictable effects on the
resource allocation, innovation stimulus and technological progress.
Economic literature acknowledges different indicators as representative values for protection
of property rights. Here within, two of them are examined: on one hand, the Rule of Law Index
as a widely used indicator published by the World Bank in the Worldwide Governance
Indicators Project, and on the other hand, the Legal System and Protection of Property Rights
Indicator coming from Economic Freedom of the World Report published by the Frazer
Institute.
The sample of countries that are included in the study is consisted by selected transitional
economies from Central and Southeast Europe. The authors run several OLS regression growth
models in order to test the hypothesis that protected property rights are determinant of
economic prosperity in the afore mentioned countries. The results of the research confirm the
thesis that protection of property rights enhances institutional environment and kindles the
economic growth.
countries around the world is not a novelty in economic literature. In the past few decades,
examination of this topic has had considerable progress presented by increased interest in
research and published work concerning understanding and definition of institutions, creating
different classifications of institutional arrangements and evaluation of their impact on
economic development, trade and investment. Douglas North, Oliver Williamson, Elinor
Ostrom, Daron Acemoglu, Simeon Djankov, Steve Pejovich are a few of the scholars who have
succeeded in their efforts to make institutional economics a separate discipline in economic
science.
By employing different criteria, many classifications of institutions have been made. In this
presentation, the authors start from one of the most common classification of the institutions:
formal versus informal institutions. By formal institutions, the formal rules of the game are
assumed such as property rights, contracts, constitutions, conventions and laws. Informal
institutions, on the other hand, represent the informal constraints of human behavior usually
presented by different norms, values, language, customs, traditions etc.
New institutional economics (NIE) places protection of private property and well defined
property rights as one of the basic pillars of market economies. These formal institutions can
be beneficial for economic prosperity in many ways. Stable and predictable institutional
environment where ownership rights are respected and contracts are enforced stimulates the
economic growth. These institutional arrangements have specific and predictable effects on the
resource allocation, innovation stimulus and technological progress.
Economic literature acknowledges different indicators as representative values for protection
of property rights. Here within, two of them are examined: on one hand, the Rule of Law Index
as a widely used indicator published by the World Bank in the Worldwide Governance
Indicators Project, and on the other hand, the Legal System and Protection of Property Rights
Indicator coming from Economic Freedom of the World Report published by the Frazer
Institute.
The sample of countries that are included in the study is consisted by selected transitional
economies from Central and Southeast Europe. The authors run several OLS regression growth
models in order to test the hypothesis that protected property rights are determinant of
economic prosperity in the afore mentioned countries. The results of the research confirm the
thesis that protection of property rights enhances institutional environment and kindles the
economic growth.
Subjects
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