Institution Building and Spillovers

This paper investigates the importance of institution building for economic growth in transition economies of Eastern Europe and CIS-States. Using recent data, it shows that even in a Guardian State, institutions like property rights protection, administration efficiency, and general rule of law matter. They appear to be even more crucial for economic take-off than standard economic factors like for example macroeconomic policy. Moreover, this paper finds that there are important spillover effects in institution building, and that countries which get one specific institution right, have also better chances to succeed in making other specific institutions work properly