International Conference on Eurasian Economies

1-3 July 2014 – Skopje, MACEDONIA

Paper detail

Paper ID : 1040
Status : Paper published
Language : English
Topic : Growth and Development
Presenter: Prof. Dr. Trajko Slaveski
Session : 2A Growth & Development

How Do Institutions Determine Economic Growth? Evidеnce from Central and Eastern Europe before and during Global Economic Crisis
How Do Institutions Determine Economic Growth? Evidеnce from Central and Eastern Europe before and during Global Economic Crisis

• Prof. Dr. Trajko Slaveski (Ss. Cyril and Methodius University, Macedonia)
• Ph.D. candidate Darko Lazarov (Goce Delchev University, Macedonia)

Abstract

We investigate the influence of institutions on economic growth and the level of income per capita in CEE region, before and during the global economic crisis. We use principal factor component analysis in order to create a more reliable and representative variable that will measure the institutional quality in our regression models, and avoid the multi colinearity, a common statistical weakness for this type of regression models. The results from panel (random and fixed effects) regressions and GMM dynamic panel regression lead to two contrasting insights. The first regression model shows positive and statistically significant correlation between institutions and economic growth, which would imply that the CEE countries that have created a strong institutional capacity during transition and post-transition period have experienced higher economic growth. The second regression model, which refers to the global economic crisis period, shows a negative influence of institutions on economic growth for the same sample of countries. One explanation for this result might be the fact that countries with a higher degree of integration into the EU were also more vulnerable to the global economic crisis.

JEL codes: O40, O43

Slaveski, Trajko, Lazarov, Darko (2014). "How Do Institutions Determine Economic Growth? Evidеnce from Central and Eastern Europe before and during Global Economic Crisis" in Proceedings of International Conference of Eurasian Economies 2014, pp.43-50, Skopje, MACEDONIA.

DOI: https://doi.org/10.36880/C05.01040

Full paper in PDF format.

Session 2A: Growth & Development