Institutional Analysis of Ukraine's Post-Socialist Economic Development

Leonid Krasnozhon

Major Professor: Peter Boettke

Committee Members: Peter Leeson, Frederic Sautet

Enterprise Hall, 318
March 17, 2010, 05:00 AM to 07:00 AM

Abstract:

The general field of economics is becoming more acceptable to the idea that social institutions have significant impact on sustainable economic development. This dissertation provides original evidence in support of the empirical importance of social institutions and sheds new light on post-socialist development by focusing on Ukraine. Advocates for increasing the role of government in economic development have overlooked the idea that policy effectiveness depends on compatibility between the policy-designed institutions and the underlying indigenous culture. If the policy design disregards the indigenous culture, a mismatch between de jure and de facto systems of governance results in the economically inefficient institutional lock-in situation. This dissertation demonstrates that policy effectiveness is subjective to the compatibility between the policy change and the underlying social institutions. I also present evidence that Ukraine has become a consolidating democracy and emerging market economy through self-governance and economic liberalization rather than centralized development planning and totalitarian control over the economy. Chapter One starts by considering the main policy debate about the proper role of government in economic development. This chapter provides a comparative political-economic analysis of institutional development in Ukraine, Russia and other former Soviet Union countries. Chapter Two presents an analysis of Ukraine’s privatization to demonstrate that the policy effectiveness is subjective to a social distance between the policy-designed institutions and the indigenous culture. Chapter Three presents an applied microeconomic analysis of the policy effectiveness in the context of Ukraine’s agro-producing industry created in a wake of the 1999 Reform. This chapter focuses on the transformation of the property rights regime by examining the policy effectiveness of reform.

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