Institutional Persistence Redux: Exploring the Relationship between Economic Development and the Rule of Law

Jari Eloranta, University of Helsinki
Mikael Hernesniemi, University of Helsinki
Andrei Markevich, University of Helsinki

The most recent (2024) Nobel Prize in economics has reminded us about the importance of a deeper understanding of institutional dynamics, including how they are linked to the concept of rule of law. Here we illustrate some patterns pertaining to the rule of law, economic development, and post-Soviet states (including Eastern European polities) via the lens of institutional persistence. First, while most of the world displays some positive relationship between the rule of law and economic development over the last 200 years, countries like Russia, stuck in a persistent pattern of weak rule of law, seem to be outliers in this respect. Second, Eastern Europe exhibits, by and large, more the characteristics of other European nations, with certain institutional continuities augmenting the relatively positive economic impact of the rule of law and a catch-up process since the fall of the USSR. Third, the study of Russia, rule of law, and the economy has boomed since the 2008 financial crisis, after which the rule of law has weakened globally, along with other factors that have amplified various populist and fragmentary tendencies amid the waning globalization wave. Fourth, our review of the literature concerning the post-Soviet states and Eastern Europe found that typically studies have found a positive link between the rule of law, in its various forms, and economic development. The magnitude of the impact seems to vary substantially, most likely depending on institutional gateways. Fifth, we emphasize that we need to direct more focus on understanding the persistence effects pertaining to the case of Russia, i.e. how the various massive political changes have impacted the deeper institutional patterns. Therefore, we will next focus on a deeper analysis of both the property rights and the credibility of the political commitment mechanisms in this region in the long run.

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 Presented in Session 136. Economic Growth and Sovereignty