AN INSTITUTIONAL APPROACH TO THE ANALYSIS OF KLEPTOCRATIC ECONOMY IN THE CONTEXT OF EUROPEANIZATION

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Abstract

Relevance. Kleptocratic economy, as an institutional system, is oriented towards a key function that involves gaining wealth by the ruling elite through the introduction of non-market transaction costs for companies and households, which is based on administrative, bureaucratic, and political violence. For this purpose, the kleptocratic states create such systems of state institutional management that give the authorities the possibility of rent-oriented behaviour, which impedes the functioning of the real sector of the economy and encourages the shadow one. Under such circumstances, transaction costs are redirected to administrative intervention into the market mechanism, rather than aimed at increasing its efficiency; property rights are not clearly specified; the level of uncertainty about rules and norms of economic behaviour increases, and the motivational system of business activity is distorted. As a result, on the one hand, inefficient allocation of resources and slow economic growth (decline) are observed, and on the other hand, there is the redistribution of income in favour of the ruling elite and its excessive enrichment, that is detrimental to the welfare of the majority of the population. The aim of the article is to analyse the political-economic formation of a kleptocratic basis, which in the future transforms the state and its economy into kleptocratic formations; defining ways of counteraction and institutional capacity for transformations in the direction of Ukraine’s aspirations for European integration. Methodological basis. The methodological basis of the research is the work of domestic and foreign scientists in the field of institutionalism and kleptocratic economy. The models of the development of a kleptocratic state and the influence of kleptocratic factors on the socio-economic processes in the country have been studied with the application of the method of analysis, systematization, and generalization. Results. It is determined that in order to liquidate the grounds of kleptocratic economy, it is of primary necessity to eliminate institutional obstacles that interfere with the unification of the legal and shadow sectors of the economy and ensure their institutional formalization. This requires the introduction of effective ways of restraining the ruling elite in order to restrict corruption abuses of the government and its close reigning coalition with special privileges and bureaucracies and form an institutional structure, in which firms and households have clearly defined property rights and also have the possibility to protect contractual rights provided by formal institutes. Particular attention should be paid to the ways of civil society’s monitoring the state information policy and methods of adopting laws, which is, the institutional foundation that guarantees the openness of information as to the actions of government institutions. According to the results of the study, definite measures are proposed, the implementation of which will ensure the opportunities for Europeanization, particularly in Ukraine. The emphasis is placed on the fact that the important factors of counteracting the kleptocratic economy are the wage reform and the “transparent” selection of employees in the public administration sector on the basis of their professional qualities only.

How to Cite

Pustoviit, R., Kuklin, O., & Kryvoruchko, M. (2019). AN INSTITUTIONAL APPROACH TO THE ANALYSIS OF KLEPTOCRATIC ECONOMY IN THE CONTEXT OF EUROPEANIZATION. Baltic Journal of Economic Studies, 5(4), 203-211. https://doi.org/10.30525/2256-0742/2019-5-4-203-211
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Keywords

kleptocratic economy, corruption, institutional environment, formal and informal institutions, European integration process

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