Institutional Dynamics versus Economic Dynamics in Romania

• Author: Oana-Ramona Socoliuc
• Position: PhD in progress, Doctoral School of Economics, 'Alexandru Ioan Cuza' University of Iasi, Romania
• Pages: 1020-1024

European Integration - Realities and Perspectives 2012

1020

Institutional Dynamics versus Economic Dynamics in Romania

Socoliuc Oana-Ramona

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Abstract: Economic growth and development are undoubtedly the major objectives of ever y nation. From the

large variety of determinant factors, institutional ec onomy emphasizes the role of institutional efficiency in

achieving such performances. In Romania , the binomial relationship between effective institutions and

development tend to be a utopia, taking into consideration that responsible for poor economic performances is

precisely the institutional inefficiency. There is a path dependency, which clearly explains the current stage of

development, gi ven the poisonous influence of ex-s oviet regime. Hereditary mark of the past inhibits any

chance of progress, inclusively in the context of EU membership, which certifies Romanian formal

integration at the transnational European level. The purpose of thi s paper is to offer an overview of Romanian

economic dynamics through the quali ty of institutional f ramework, and furthermore, t o highlight the

necessary measures for redressing the inland economic conditions.

Keywords: institutions; pat h dependency; institutional efficiency; instituti onal dynamics; economic

dynamics.

1. Introduction

Beyond classical and neoclassical perspective on economic growth and the determinants of wealth,

currently the New Institutional Economics is required to explain development gaps between countries

all over the world. It promotes a distinct approach of economic theory, where institutions are the

central pillar of analysis, even if free market remains also a key element. Institutional quality

determines the level of economic development, as it relates to both, incentives and factors which

inhibit this positive evolution. Economic theory of institutions pleads for the biunique relationship

between institutions, as the rules of the game, and economic performance. In other words, institutional

dynamics influences economic dynamics; the quality of institutions derives from economic evolutions,

as well as a healthy institutional system is able to promote economic growth and development.

2. Institutions – Pillar of Growth and Economic Development

The multiple definitions of the term institution have a common denominator, the idea of behavioral

regularity (Hodgson, 2006; North, 2003; Sugden, 1986). Its origins proceed from the particularities of

social institution, allowing the expression of a certain behavior in some specific situations (Marinescu,

2004). Taking into account the bounded rationality of individuals, the uncertainty and risk specific for

the economic environment, institutions are responsible for doubt reduction, structuring everyday life.

Moreover, they constitute an existential premise of any society.

The generic title of institutions include on the one hand, formal institutions that support free market

and its development, like: property rights, credit institutions, those for macroeconomic stabilization,

such as fiscal or monetary policy, institutions for social insurances, or those for conflict management

adjustment. On the other hand, there are informal institutions: habits, traditions, ethical rules, or codes

of behavior (Rodrik, 2000). These two categories coexist and mutually interfere; consequently, we

might endorse the idea that institutions should be perceived as a whole. The interaction between these

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PhD in progress, Doctoral School of Economics, „Alexa ndru Ioan Cuza” University of Iasi, Romania, Addres: 11 Carol I

Blvd, 700506 Iasi, Romania, Tel.: +40 (232) 201000, Fax: +40 (232) 201201, Corresponding author:

oanasocoliuc@gmail.com.