The theory of institutional traps, i.e. ineffective but stable institutions or behavior norms, is develope din connection with economic reforms. Mechanisms are described that cause a system to get into a trap and ways of going out of it are analyzed. Concepts of transformation costs and...

In our previous papers (Polterovich V., Popov V., 2007; Polterovich V., Popov V., Tonis A., 2006) it was shown that democratization (increase in the political rights index of the Freedom house in 1970-2000) can negatively affect economic growth, if the quality of institutions at the beginning of the...

One of the main obstacles for successful economic development is the formation of institutional traps, inefficient yet stable norms of behaviour. Domination of barter exchange, arrears, corruption and black market activities are examples of institutional traps that have hampered reforms in...

Two myths have harmed many economies throughout the world. One is the theory of absolute advantage of central planning over the market mechanism, and the other is the belief that efficient markets develop spontaneously and quickly enough if appropriate economic legislation is established....

There are two innovations in the paper as compared to the previous literature on democracy and growth. First, we consider not only the level of democracy, but also changes in this level in the 1970s-1990s as measured by increments of Freedom House political rights indices. Second, the...

There are two innovations as compared to the previous literature on democratization and growth. First, not only the level of democracy is taken into account, but also changes in this level in the 1970s-1990s as measured by the political rights indices of the Freedom House. Second, the...

Any legislative framework is likely to generate different institutions or norms of behavior which the legislator occasionally could have never foreseen. I suggested a general pattern, on which inefficient, if stable, norms or institutions called institutional traps would form.

We suggest a dynamic game theoretic model to explain why resource abundance may lead to instability of democracy. Stationary Markov perfect equilibria of this game with four players – Politician, Oligarch, Autocrat and Public (voters) – are analyzed. Choosing a rate of resource rent tax,...

There are two innovations in the paper as compared to the previous literature on democracy and growth. First, we consider not only the level of democracy, but also changes in this level in the 1970s-1990s as measured by increments of Freedom House political rights indices. Second, the...

We analyze data on sustainability of democratic regimes in resource rich countries and suggest a two-period model to explain why resource abundance may lead to instability of democracy in some countries, but does not create any difficulties for democratic system in other ones. Our central idea...