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Global Development and Poverty Reduction

The Challenge for International Institutions

Edited by John-ren Chen and David Sapsford

At the beginning of the third millennium, underdevelopment and poverty continue to remain critical problems on a global scale. The purpose of this volume is to explore the various ways in which the institutions of the global economy might rise to the challenges posed by the twin goals of increasing the pace of global development and alleviating poverty.
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Chapter 10: Institutions, Integration and Poverty in Eastern Europe and the Former Soviet Union (EEFSU)

Syed M. Ahsan and Melania Nica


Syed M. Ahsan and Melania Nica MOTIVATION In this chapter, our goal is to discern and evaluate the process by which poverty may be reduced, and in particular isolate and interpret the role of economic growth, institutions (both domestic and international) and integration in that process. We carry out the above analysis in the context of the transition countries of Eastern Europe and former Soviet Union (EEFSU). Although we primarily conceive of institutions as the enabling framework that facilitates economic and non-economic exchanges à la New Institutional Economics (NIE), we also take international aspects of institutions into account. Among international institutions, one may think of international trade agreements or membership of global entities such as the World Trade Organization (WTO). Alternatively, in a regional (here European) context, one may examine the interactions with the European Union (EU). Since the end of the communist era, the EEFSU countries have launched an intensive transformation of their political and economic institutions, and the EU has been supporting these reforms; it is also providing direct assistance in the form of investment funds to the private sector. It is evident that these global/regional interactions may lead to advances in investment, trade and technology, and therefore constitute elements of the enabling framework cited above. Below we examine the effect of EBRD investments on growth and poverty. The central tenet of new institutional economics is that institutions (political and economic ones) are generally incomplete in any setting and, hence, transactions are costlier than they ought to be in...

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