BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 10/2002:
Transition in FSU and sub-Saharan countries: The role of institutions
Juhani Laurila ()
Abstract: This study compares transition processes in countries of
Central and Eastern Europe, the former Soviet Union (FSU) and sub-Saharan
Africa. By widening the scope from most- to least-developed transition
economies, the study establishes the importance of a strong state with
evolved institutional capacity to protect citizens, enforce property rights
and generate social capital. The evidence presented further argues that
enforceable, credible property rights with associated market discipline are
among the best antidotes to corruption, shadow economies, criminal
injustice and poverty. The presence of accountable institutions also
influences economic growth and the ability of a country to attract trade
and foreign direct investment. Consequently, when institutions of FSU and
sub-Saharan countries develop to the point they become attractive to
traders and investors from rich countries, their governments need to focus
on abolition of barriers to trade, investment and capital. The author
commends the recent reorientation of the international donor community
towards encouraging recipient governments to commit credibly to increasing
capacities of their state institutions with a view to supporting
property-based rule of law and social order.
66 pages, September 4, 2002
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