engleski

Trust and Business Environment in Western Balkan Countries

There is a large body of literature that emphasise importance of trust for well-functioning markets (e.g. Fukuyama, 1995 ; North, 1981 ; Kornai, Rothstein and Rose-Ackerman 2004). Trust is particularly important in transactions that are not formalized through the contractual arrangements. Some of the known benefits of trust include reduction of transaction costs, increased government efficiency, financial development, better functioning of firms etc. However, in transition countries, trust is a commodity in a relatively short supply (Raiser et al., 2003). The main goal of this paper is to analyse the effects of (dis)trust on various aspects of business environment in Western Balkan countries: Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro and Serbia. Although the process of economic transition in these countries was quite divergent, they are all faced with substantial problems in their business environment, legal systems, quality of governance etc. In achieving this goal, we primarily employ data from survey conducted in transition countries by EBRD and World Bank, i.e. the Business Environment and Enterprise Performance Survey (BEEPS). The methodological approach is based on cross- sectional analysis on firm level which will provide insights into the effects of trust on business environment quality.

transition, Western Balkan, trust, business environment

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