Essays on the Historical and Current Institutional Development of South East and Central European States
Dimitrova-Grajzl, Valentina P.
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This dissertation examines the institutional determinants of one set of countries - the former socialist states in South East and Central Europe. It is motivated by the observation that fifteen years after the beginning of transition we see a divergence in the institutional performance of the transition countries. The Balkan (South East European states) have been consistently lagging behind the Central European states. Why is there such a substantial difference in the performance and level of institutions in these two sets of former socialist countries? Unlike the sparse existing literature, which attempt to answer this question, this dissertation identifies the Ottoman and Habsburg historical legacies, rather than the socialist legacy, as a key source of divergence in institutional performance of the countries of South East and Central Europe. In Chapter 1, we identify the legacies of the Ottoman Empire and their historical origins. The chapter's main contribution is twofold. First, it identifies and discusses the origins of characteristics of the Ottoman Empire that shaped the institutional structure of its successor states. Second, the chapter analyzes the impact of these characteristics on people's behavior and incentives. Building upon the key historical dynamics identified in Chapter 1, Chapter 2 develops a stylized theoretical model of the Ottoman Empire. The model attempts to explain the rise and decline of the Empire and indirectly, the historical evolution of the Ottoman legacy. It, thereby, contributed to the literature by looking at how the Ottoman seemingly irrational and static structure could have been optimal subject to certain constraints. Chapter 3 attempts to explain the reasons for the 'great divide' in performance of the countries of South East and Central European post-socialist states. By comparing the historical developments and legacies of the Ottoman Empire with those of the Habsburg Empire, Chapter 3 draws a number of hypotheses about the effect of these legacies on current institutional performance. It presents three estimation procedures that allow us to test the hypotheses and discusses the estimation results in light of alternative theories.