Institutions in Transition: Were They Really Neglected?

Thus far, we have narrowed down exactly what is meant by an “institution” in the economic sense, a fact that was missing in much of the transition economics literature. It is now that we will turn our attention to the heart of this research, which is examining the evolution of institutions in transition economies and how they influenced and were influenced by the transition process. The first question to be addressed in ascertaining the effects of institutions is the oft-repeated assertion by Kołodko (1999), Campos and Corricelli (2002), Voigt and Engerer (2002), and many others that institutions were “neglected” in transition, both by policymakers and by the economics profession writ large. But was this the case? Did institutions change even if there was no conscious attempt to remake them? And how did this neglect affect economic outcomes? The purpose of this chapter is to put to rest the idea that institutions were neglected, in hopes of thus moving on to more interesting questions; however, as a waystation on this path, it is a necessary stop in order to ascertain some of the institutional influence that we will examine later in the book.