Date of Award

December 2020

Document Type


Degree Name

Master of Arts (MA)



Committee Member

F. Andrew Hanssen

Committee Member

Robert Fleck

Committee Member

Michal Jerzmanowski


This paper examines the impact of institutional quality on the level of new business formation in 26 of the former socialist states from 2006-2018. Using cross-sectional and panel data, I find that the quality of a nation’s institutions, as measured by the rule of law and control of corruption, has a statistically and economically significant effect on the number of newly registered LLCs. Economies willing to improve their institutional quality can expect more businesses start-ups to register in the formal economy. Specifically, improving the control of corruption by one standard deviation is associated with between 1.5 and 2.4 new businesses registered per 1,000 working age people. Furthermore, I propose that institutional quality also influences an individual’s decision whether to operate a new business start-up in the informal or formal sector.



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