Statistical Modeling of the National Economy Transformation in the Globalization Context: Institutional Approach

Abstract

The article is devoted to the important problem: assessment of national economy transformation from the institutional perspective. It is demonstrated that traditional neo-classical and neo-Keynesian approaches are incapable to fully explain the character of change in macroeconomic indicators in countries with economies that are incomparable by the majority of factors.

It is shown that the institutional setting has dynamic effects for the economic system. As follows from the theory of institutionalism, when the national economic system is under transformation, the society needs to address the triple problem: first, to adopt change and new mechanisms; second, to eliminate negative effects of change and mistakes, and, third, to preserve the values of the past.

A broad range of socio-political factors of the institutional setting, analyzed in economic literature at theoretical and empirical level, is highlighted. They include political regime (democracy or other form of government), economic rights and freedoms, type of ownership, freedom and autonomy of judicial system, effectiveness of public administration, supremacy of law and social stability. Also, performance indicators for education and health care system, indicators of shadow economy and social inequality are accounted for in selected empirical works.

A theoretical model is proposed, which includes index of economic freedoms and number of air flights. The assessment of regression models for countries with the highest index of economic freedom demonstrates that the effective institutes are most effective drivers of economic growth and population’s welfare. However, the reverse statistical impact of index of economic freedom is found for Hong Kong and Singapore; it assumes that the already established and effective institutes are capable to promote economic growth by inertia, irrespective of the model indicators.