Understanding Institutions and Institutional Change in Weak Post-Soviet Democracies : The Case of Doing Business Reforms in Moldova

The 2010 World Bank Doing Business Report ranks Moldova in the top decile on reforms aimed at improving the local doing business environment. Moldova's success is attributed to a number of new policy reforms, started in 2009, which simplified the existing administrative processes of business formalization. However, as a weak democracy in transition, Moldova lacks the institutional foundations to support beneficial reforms. Numerous quantitative and qualitative studies describe Moldova's poor economic performance, lasting high levels of corruption, massive out-migration, and lack of media and political freedom. This paper attempts to complement the recent World Bank report with qualitative insights gathered from interviews with Moldovan entrepreneurs. Our interviews revealed the existence of many informal regulatory practices with a crowding out effect on productive entrepreneurship in Moldova. Without these informal barriers to doing business factored in, the success of Moldova's recent reforms is overestimated. In reality, the quality of the overall formal-informal institutional environment within which Moldovan entrepreneurs conduct their daily affairs is lower