Institutional Complementarity, Economic Performance, and Governance in the Post-Communist World

Abstract

Our article presents an index of institutional complementarity for 27 postcommunist economies, and evaluates a key claim of the Varieties of Capitalism paradigm. The empirical novelty of the index lies in its integration of informal institutions as well as its combination of macro-level and firm-level dimensions. Theoretically, we use the index to propose two boundary conditions for the theory of comparative institutional advantage whose empirical support has been mixed in the literature. We find that (1) the link between institutional complementarity and the measures of income, employment, and inflation is contingent on the quality of governance, and (2) institutional complementarity has no impact on life expectancy in the respective economies. We theorize the importance of governance quality as a crucial factor in the analysis of capitalist systems.

Keywords: varieties of capitalism, post-communist transition, governance, institutional complementarity, economic performance, rule of law

JEL Classification: P14, P16, P26, P20, P37, P52, P48, O17, O38, N40, N44, N80, K42, P20, P10, P17, P27