Institutional reforms for economic growth in the Western Balkan countries

Abstract

© 2020 The Society for Policy Modeling The paper presents an empirical analysis of the impact of institutional reform policies and institutional quality on the economic growth of five Western Balkan countries (WB countries: Serbia, Montenegro, Bosnia and Herzegovina, Northern Macedonia and Albania) in the period 2006-2016. It was developed its own model of quantification concerning the impact of the most important indicators of the quality of institutions on the economic growth of these countries, which are in a delayed phase of transition and at some stage in the EU accession process. Achieving high and stable rates of economic growth for WB countries becomes the ultimate prerequisite for completing the EU transition and accession process. In order to improve growth dynamics, among other things, it is necessary to identify key drivers of growth and to model appropriate growth and development policies based on the results obtained. In the paper, WB countries were viewed as a whole. By empirically testing the impact of individual quality indicators of institutions on economic growth, according to the World Bank Governance Indicators methodology by using panel data multiple linear regression analysis, the largest statistically significant and positive impact came from the Government Effectiveness and Regulatory Quality variable. The intensity of the impact of the Control of Corruption and Rule of Law variable on GDP per capita is slightly weaker, but it is also very pronounced. In this respect, the empirical results obtained can be a useful framework for modeling the development policies of WB countries. They represent an important guide for policy makers to implement measures aimed at improving the quality of institutions and at the same time modeling economic growth policies.