Transition Report 2013 Stuck in transition?

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Facts at a glance

years after the start of the transition process, economic institutions in the transition region are, on average, still weaker than in other countries with comparable levels of income.

0.5 The correlation between measures of democracy and regulatory quality in a global sample of countries.

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-year period prior to accession saw a peak in terms of institutional improvements in EU accession countries.

of Kyrgyz SMEs say that unofficial payments are required in everyday business.

Economic institutions

Fractionalisation of society

Another country characteristic that can affect the success of reforms is the extent to which a society divides along ethnic lines or in other ways.1 In divided societies different groups may struggle to agree on the direction of reforms, or they may have little trust in each other or in government institutions more generally.2 One commonly used indicator of such divisions is the index of ethnic fractionalisation.3 This shows the probability of two randomly chosen individuals in a country belonging to different ethnic groups.

Tables 3.1 and 3.2 investigate whether ethnic fractionalisation has had an adverse impact on reforms and economic institutions for given levels of democracy, and whether this effect is blunted in the least democratic systems, which may be able to repress ethnic tensions (see the interaction term between a Polity2 score of below -5 and fractionalisation). They do not find strong support for either of these effects.

At the same time, anecdotal evidence suggests that ethnic divisions may have played an important role in some countries, such as the Kyrgyz Republic, where ethnic fractionalisation may have cut both ways. On the one hand, it may have contributed to the development of democratic institutions; but on the other hand, it may have reduced their ability to implement effective reforms (see Box 3.2).


  1. See Alesina et al. (1999). [back]
  2. See Putnam et al. (1994). [back]
  3. See Wacziarg et al. (2003). [back]