Friday, June 29, 2007

What are the impediments to growth?

Slovak daily SME came with an unsurprising answer citing the opinion of the Slovak Chamber of Commerce and Industry.

According to the article (in Slovak), the three biggest problems in the economy are: enforcement of law, education, and export promotion. Of course, courts turned out to be the worst part of it. Therefore, we will look at the numbers there in more detail.

Heritage foundation measures the Index of Economic Freedom, assessing the main areas that affect the business environment. I chose indicators of property rights enforcement and corruption to compare their values in the Czech Republic, Hungary, Poland and Slovakia.

Another indicator would be the World Bank Governance Indicators dataset, compiled into a neat rule of law interactive map.

Looking at the graph, there is not too much progress visible in the last twelve years, comparing Slovakia to its neighbors. However, there is a slight improvement in property rights and corruption absolute terms from 2005 to 2007. Nevertheless, law enforcement really seems to be a "bottleneck" of our economy.

Policy prescription in this regard would be a transparent anti-corruption legislation, dealt with in, for instance, Polinsky, Shavell (1999), and a very profound change in judicial execution of law, dealth with in Kühn (2005).

1 comment:

Michal Lehuta said...

I still can't grasp how come the 1990s were supposedly better than the last couple of years..