Danko Tarabar

Date of Graduation

2017

Document Type

Dissertation

Degree Type

PhD

College

College of Business and Economics

Department

Economics

Committee Chair

Joshua C Hall

Committee Co-Chair

Arabinda Basistha

Committee Member

Bryan C McCannon

Committee Member

Andrew T Young

Abstract

This dissertation is a collection of empirical essays studying the drivers of institutional change and the effects of economic and political integration across countries, with a special focus on the European setting. Chapter 2 examines the drivers of market-institutional change within transition countries, the early post-communist economies undergoing an economic system switch from socialism to a market order in the immediate aftermath of communism's collapse, between 1989 and 2001. I hypothesize that the effectiveness of political liberalization, a factor identified to be the major driver of economic reform in transition countries, is conditional on the underlying cultural attitudes that influence how voters may legitimize particular institutional arrangements. By considering the interaction term between culture and democracy, I disaggregate the marginal effect of democracy on market reform adoption by the cultural environment from which democracy emerged. I find that in societies that foster individualistic and politically egalitarian attitudes, the positive effect of democracy on reforms is amplified. Chapter 3 considers the impact of EU integration on institutional quality in a set of European countries between 1970 and 2010. EU integration can promote institutional improvement via at least two mechanisms: the pre-membership accession process, during which countries are mandated to implement reforms as a condition for joining, and the membership stage, in which new member states are ushered in a common market of unrestricted mobility. On the latter, it is argued that the presence of the common market encourages competition between members in adopting better policies and institutions with the aim of attracting capital and labor or risk their exit. The main finding is that integration with the EU often has a statistically negligible impact on institutional improvement, and that when the impact is significant, it is generally modest. Chapter 4 considers how the intensity of EU member countries' economic activity with the EU's common market along with their institutional conformity with EU law relate to entrepreneurial activity, measured by the prevalence of microfirms and the rate of self-employment between 2004 and 2012. It is shown that the deepening of economic and political integration with the EU stimulates entrepreneurial activity in member countries by expanding opportunities for specialization, promoting a healthy competitive environment, and reducing transaction costs of operating a business. Chapter 5 summarizes the findings of this dissertation and offers concluding remarks.

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