When formal institutions fail in fostering economic growth: the case of post-communist countries

The article explains the peculiarities of institutional effects on growth rates in post-communist countries. By proposing a certain dependence of the institution-growth nexus on the nature of institutional emergence, the distinction between revolutionary and evolutionary processes of institution formation is introduced. Theoretical and empirical juxtapositions are used to demonstrate that transition countries’ institutions that are constructed revolutionarily differ from those that emerge evolutionarily in a twofold manner in their relationship to growth. Growth rates of their economies are less likely to depend on the quality of economic institutions and are more likely to be a function of the maturity of political institutions. In addition, economic institutions in post-communist countries prove to be a product of the quality of political bodies to a greater extent than their evolutionary alternatives.