The dynamics of institutional change in transition economics

The 1990's saw a large addition of new economies to the world order with the collapse of socialism in Central and Eastern Europe and the former Soviet Union. As new structures emerged in these economies to deal with the conversion from predominantly centrally planned to market-based economies, the institutions to support the transition had to develop. This study develops and evaluates a model to measure the dynamic institutional change undergone by countries in transition. This measure provides an indication of the state of transition and whether economies have moved toward or away from market-based conditions. A criteria is established to determine when transition might be completed and an economy's institutional structure is set for its continued operation. A panel data study confirms the relationship between economic growth and institutional change and validates the importance of institutional change to a transitional economy.