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How do informal institutions affect FDI? An assessment of the literature
71-82Views:143A number of studies have examined the determinants of foreign direct investments (FDI). Institutions can be seen as an immobile location advantage, which can influence FDI flows. The aim of this study is to summarise the empirical literature on the growing importance of institutions in FDI decisions, especially that of informal institutions. The study also suggests using another measure as a proxy for informal institutions when analyzing the impact of informal institutions on FDI.
Journal of Economic Literature (JEL) codes: E02, F02
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The Comparative Analysis of the Cultural Financing Models of France and Hungary
50-67Views:157Both France and Hungary use the so called coordinated cultural financing model, in which the active role of the state is decisive. However, instead of producing a similar model, the level of the cultural sector value added to GDP in the two countries is different. The article’s aim is to answer this puzzle. The focus is on the role of institutions and state subsidy. The analysis tries to understand whether direct state subsidy plays a decisive role in the economic performance of the cultural sector. The analysis also shows whether the harmony of formal and informal institutions have a positive effect on the economic growth of the cultural sector. The assumption is that the size of direct government subsidy cannot increase economic growth. If the formal and informal institutions are in harmony, and if there is a long-run cultural policy strategy in a country, the cultural sector value added to GDP is higher.
Journal of Economic Literature (JEL) classifications: Z10, Z11
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Empirical analysis in the context of economic, technological and institutional development: the distinction between innovator and imitator countries
3-21Views:182The driving force of economic growth is technological progress, which can be realized in two ways at the aggregate level. On the one hand, it can be a result of independent research and development, i.e. it can be realized in an innovation-driven manner. Alternatively, it can be the result of an adaptation from other countries, i.e. through imitation, which is a strategy that many countries employ successfully today. In both cases, it is the institutions, including both their formal and informal elements, which create the opportunity for technological progress. The aim of this study is to differentiate between the innovator and the imitator countries in order to highlight the differences in their institutions. The classification is done by a cluster analysis of countries, which is performed with the help of a technological and institutional environment index constructed by a principal-component analysis. The analysis confirms that economic, technological and institutional development are closely linked in the countries studied.
Journal of Economic Literature (JEL) codes: O31, O33, O43
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Trust as a Cost Reducing Factor
74-84Views:198The current study analyzes the cost reducing feature of one of the well-researched informal institutions, trust. The micro level analysis is followed by a macro level approach, which is aimed at highlighting trust’s direct cost reducing element via transaction costs and its indirect effect through the legal system. As part of the latter an empirical evaluation of 25 European Union countries has been carried out regarding the connection between costs due to administrative burden and trust. On the one hand academic economic literature proves that trust reduces transaction costs, and on the other hand that the effectiveness of the legal system contributes to the decrease of transaction costs. According to our assumption the increase of the level of trust improves the effectiveness of the legal system and via this
mechanism it supports the reduction of transaction costs.JEL classification: D02, E02