Original scientific paper
https://doi.org/10.20901/pm.62.1.06
THE ROLE OF INSTITUTIONS IN THE ECONOMIC DEVELOPMENT OF EU REGIONS
Hrvoje Hrnkaš
orcid.org/0009-0003-5067-2462
Abstract
Drawing on institutional theory, this study develops a novel composite index of institutional quality that integrates indicators of both formal and informal institutions for 107 European Union regions. Using the latest dataset available, which includes the post-COVID-19 period, it examines the relationship between this index and economic development measured by GDP per capita. The results reveal a positive and statistically significant relationship: regions with higher institutional quality exhibit greater levels of economic development. These findings support the view that strong formal (quality of governance) and informal institutions (social capital) lower transaction costs and stimulate growth. Although additional research is needed to establish causality with greater confidence, the evidence suggests that higher institutional quality is likely to contribute to stronger economic performance across EU regions.
Keywords
Institutions; Quality of Government; Social Capital; Economic Development; EU Regions
Hrčak ID:
333836
URI
Publication date:
18.7.2025.
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