Context is Everything : Measuring Institutional Change in Transition Economies

What aspects of institution building most affect the transition to a market economy? In terms of effects on per capita income and school enrollment, the rule of law may be most important. In terms of life expectancy, the quality of the bureaucracy plays a more crucial role.Campos presents measures with which to map institution building during the transition from centrally planned to market economies. Data collection and indicators are measured in terms of five institutional dimensions of governance:- Accountability of the executive- Quality of the bureaucracy- Rule of law- Character of policymaking process- Strength of civil society.Campos highlights the differences over time and between Central and Eastern European countries and those of the former Soviet Union.In terms of effects on per capita income and school enrollment, Campos finds the rule of law to be the most important institutional dimension, both for the sample as a whole and for differences between the two regions.In terms of life expectancy, however, the quality of the bureaucracy plays the most crucial role.One important message Campos draws from the results is that institutions do change over time and are by no means as immutable as the literature has suggested. The range of feasible policy choices (for changing institutions) may be much wider than is often assumed.This paper is a product of Development Policy, Development Economics Senior Vice Presidency. The author may be contacted at nauro.campos@cerge.cuni.cz