"Enterprise Development and Behavior including Corporate Governance and Restructuring"

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Political Determinants of Private Sector Growth in Eastern Europe

Thematic Area:

“Enterprise Development and Behavior including Corporate Governance and Restructuring”

Researcher 1: Răzvan Grecu

Tel: +40.21.326.11.85


Researcher 2: Laurenţiu Ştefan

Tel: +40.21.326.11.85


Administrating Institution:

Romanian Society of Political Science,

Agricultiori Str., No 128 Bis, Sector III,

Bucharest, Romania

Tel/Fax: +40.21.326.11.85

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The research we propose analyzes the impact of political institutions (broader defined) on the growth of private sector in Eastern Europe. While a large amount of scholarly researches focused on the influence of economic policies and indicators on the extension of private sector in Eastern Europe, the political factors that supported or hindered such development have been often neglected. Using a comparative approach and statistical analysis based on linear regression, our research gives account of the impact of such political factors on the development of private enterprises in Eastern Europe.

Relevance of the Project

Fifteen years after the breakdown of communist regimes in Eastern Europe, we notice important differences on the development of private sectors in countries of Central and Eastern Europe. One major question can be raised about the differences that appeared in this process among countries of the region: What factors can explain this variation? This is a particular important research question because the economic development (but also democratic stability) of the CEE countries is largely dependent of development of private sector, in the context of diminishing state sectors in economy, privatization of state enterprises etc.

The approaches to this research question are noticeably different. Economists, for instance, stressed the importance of particular economic policies in promoting the expansion of private sector (like the role of controlling inflation, the openness of national economies etc). Much of the emphasis was put on macroeconomic policies and on the needs of building up the institutional structures that are appropriate to a market economy. Those are, certainly, powerful determinants of the private sector development. However, from the point of view of political science, there is still a question that needs for deeper analysis: Are there political factors or institutional factors that facilitate or inhibit the development of private sector and private enterprises? Our research is going to focus on this particular issue.

Theoretical Approach and Significance of the Research Topic

The existence of some economic and social conditions as prerequisites of democracy or democratic change is a well-known theory in political science. Such theories of political modernization and political development became extremely fashionable in political science in the ‘50s-70s, and stated that political democracy could be achieved or was becoming stabilized once the country or polity reached a certain level of socio-economic development (Lipset: 1959, Neubauer: 1967, Jackman: 1973). As Lipset pointed out, “the more well-to-do a nation, the greater the chances that it will sustain democracy” (Lipset: 1959, p. 75), bringing out a hypothesis that has shaped scientific debates in the field of political democracy and democratization for the last forty years. The major theoretical implication behind this empirical association lies on the assumption that the increasing economical benefits for people of a particular polity will increase the demands for democratic reforms, or will make people to institutionalize much deeper the political institutions of democracy (Burkhart & Lewis: 1994, p.1).

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However, the relationship between economic development and political democracy is not as obvious as those scholars wanted to emphasize. Firstly, Jackson (1973, 621) argues that this relationship is rather curvilinear than linear, as Lipset suggested. Secondly, the apparent relationship between democracy and economic development was largely determined by either operationalization faults of the concept of democracy or by selection bias (for instance, some authors explicitly excluded the communist countries from their analysis when looking to the relationship between political democracy and economic development, see Bollen & Jackman: 1985). Especially in the ‘80s, scholars started to question the existence of any ...

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