Post-communist Transition as a Path Break: Comparing Legal Institutional Effects on Economic Growth between Path-breaking and Path-drifting Institutional Reforms

Abstract

This article explains the peculiarities of institutional effects on growth rates in postcommunist countries. By proposing a certain dependence of the institution–growth nexus on the mode of institutional grafting, the distinction between drift-phase and path-breaking institutional change is introduced. Theoretical juxtapositions show that transition countries’ institutions built through path-breaking institutional reforms differ from those that emerge evolutionarily in the drift phase in a twofold manner in their relationship to growth. Growth rates of their economies are less likely to depend on the quality of legal institutions and are more likely to be a function of the maturity of political institutions. In addition, legal institutional change in the post-communist world is a product of the quality of the political environment to a greater extent than their drift-phase alternatives. These propositions are tested empirically based on a sample of 87 countries derived from the POLITY IV Project’s website. JEL Classification: O17, O43, O57, P26, P37