Application of vector measure construction methods to estimate quality of institutions : nations in transition

Abstract

Purpose: The aim of the article is a multi-criteria assessment of the quality of institutions in countries of Central and Eastern Europe (CEE) and Central Asia, which in the early 1990s introduced a market system in their economies. The analysis was carried out taking into account the division of 28 analysed countries into two groups - current EU members and those that do not belong to this group. Design/Methodology/Approach: The economies under studies were analysed by selected 8 dimensions quality of institutions. Data from 1995, 2004 and 2018 were collected and compared, taking into consideration the EU members and other countries. The economies were compared and classified using the Vector Measure Construction Method (VMCM). Findings: The effects of introducing major transformation reforms turned out to be different in the analysed countries. The initial conditions for the transformation and the timing of reforms seem to have influenced them. Also accession to the EU had a significant impact on the improvement of the quality of institutions in the EU member states. It has led to a large stratification of two groups of countries – the EU members and other analysed countries. Practical Implications: VMCM method is dedicated to the study of complex economic processes. These approach allows for making rankings, classifications of objects and the analysis of the change dynamics. The performed assessment of the quality of institutions may be helpful for the governments of the surveyed countries and constitute a justification for a change in institutional policy, or may support the decisions of investors looking for an appropriate country of location. Originality/Value: Due to the advantages of VMCM, applying it to the analysis and comparison of the quality of institutions in the surveyed countries allowed for taking into account the multidimensionality of the problem and its better, in-depth assessment.