Institutions in Transition: Reliability of Rules and Economic Performance in Former Socialist Countries

47 Pages Posted: 6 Jan 2005

See all articles by Aymo Brunetti

Aymo Brunetti

The World Bank

Gregory Kisunko

World Bank

Beatrice Weder

University of Mainz - Department of Economics

Date Written: August 1997

Abstract

The predictability of a transition economy's institutional framework may well influence the amount of foreign direct investment and economic growth the economy can expect.

Building reliable institutions that support a market system is widely believed to be critical to a successful economic transition.

Brunetti, Kisunko, and Weder present indicators on the predictability of the institutional framework across twenty transition economies - indicators of the predictability of rules, political stability, the security of property rights, the reliability of the judiciary, and the lack of corruption. They then investigate whether these indicators can explain differences in economic performance.

The results suggest that the predictability of the institutional framework may indeed explain a large part of differences in foreign direct investment and in economic growth among transition economies. Political stability and secure property rights are particularly important to entrepreneurial confidence in the economy.

This paper - a product of the Office of the Chief Economist and Senior Vice President, Development Economics - was produced as a background paper for World Development Report 1997: The Role of the State in a Changing World. The study was funded in part by the Research Support Budget under the research projects "Cross-Country Indicators of Institutional Uncertainty" (RPO 680-51) and "Indicators of Government Quality as Perceived by the Private Sector" (RPO 681-52).

JEL Classification: E22,O42

Suggested Citation

Brunetti, Aymo and Kisunko, Gregory and Weder di Mauro, Beatrice, Institutions in Transition: Reliability of Rules and Economic Performance in Former Socialist Countries (August 1997). World Bank Policy Research Working Paper No. 1809. Available at SSRN: https://ssrn.com/abstract=81368

Aymo Brunetti

The World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Gregory Kisunko

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Beatrice Weder di Mauro

University of Mainz - Department of Economics ( email )

Chair of Corporate Finance
D-55099 Mainz, 55128
Germany
+49 613 1392 0144 (Phone)
+49 613 1392 5053 (Fax)

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