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Institutions and Creative Destruction in CEECs: Determinants of Inefficient Use of Assets

Author

Listed:
  • Jarko Fidrmuc

    (Zeppelin University Friedrichshafe)

  • Martin Siddiquiy

Abstract

We analyze the relationship between institutional quality and firm efficiency. Using rich data on firms in the European Union between 2005 and 2012, we show that high institutional quality lowers the share of persistently inefficiently used assets. The adverse effect of low institutional quality may be one of the narrow channels through which institutions affect income per capita in the long-run. Our approach combines institutional economics and Schumpeterian creative destruction. In addition, we observe similarities between inefficiently used assets in Europe and the phenomenon of zombie lending in Japan during the last decades.

Suggested Citation

  • Jarko Fidrmuc & Martin Siddiquiy, 2015. "Institutions and Creative Destruction in CEECs: Determinants of Inefficient Use of Assets," Working Papers 353, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    • Handle: RePEc:ost:wpaper:353
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    More about this item

    Keywords

    Institutions; Unproductive Assets; European Union; Creative Destruction;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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