INSTITUTIONS AND THEIR IMPACT ON THE ECONOMIC DEVELOPMENT: MIDDLE INCOME TRAP

Abstract

The article is devoted to the study of the relationship between institutional and economic development of post-socialist countries. The author substantiates the relevance of the chosen topic for post-socialist countries, describes the essence and features of the middle income trap and explains the economic and institutional basis for its formation. The dynamics of economic development of 24 post-socialist countries for the period 2007-2020 is analysed based on World Bank data. Clustering by the method of k-means is made based on this analysis also. The interdependence between the level of institutional development and the level of economic development of the analysed countries was revealed by analysing the institutional indicators (international property rights index and corruption perception index) of post-socialist countries in 2020, which confirmed the main hypothesis of the study. The author describes the essence of the dysfunctional phenomenon of the institutional development paradox and its role in the institutional development of post-socialist countries in the context of overcoming the middle-income trap. It is established that the institutional dysfunctions formed in the transformation period continue to hurt the development of economic systems, including the economy of Ukraine. Based on the results, the author proposes practical recommendations for further implementation of the necessary institutional reforms aimed at avoiding the middle income trap economy of Ukraine. They include measures to further liberalize the economy, improve mechanisms to protect property rights, combat corruption and more.