The Relative Importance of Institutions in Economic Outcomes in Transition

Abstract

While the last chapter may have proved that, on the whole, institutions were not neglected in the transition to a free-market economy, the point itself may be moot if institutions played only a relatively small role in determining economic outcomes. As the literature review in Chapter 2 touched upon, and this chapter will show, a major point of contention in the transition economics field has been over this very point, on the relative contribution of institutions to growth. This chapter intends to structure a model to examine the relative role of institutions versus two other important factors: policies, including macroeconomic stabilization and packages of policies used to effect the transition, and personalities, or the people involved in the transition in each country.