Institutions and economic growth in European post-transition economies

Abstract

This paper discusses the role of institutions in economic growth in selected European post transition economies. During the 1990s, Central and Eastern European countries faced challenges adapting their political and economic systems to keep up with a rapidly changing global landscape. They needed new institutions like regulations, social norms, and organisations to support a capitalist economy. These institutions provide a framework for economic activity and guide individuals to act in ways that align with economic goals. They are crucial for creating a stable environment for economic growth, promoting investment and innovation, and reducing uncertainty, which is essential for economic success. To analyse this, we conduct an econometric analysis of 16 European post-transition countries from 1998-2019 using fixed-effect, Arellano and Bond’s first difference GMM estimator, and the system GMM estimator. The results indicate that institutions significantly impact economic growth.