Abstract:

Government effectiveness can be effective on the country's economy through the political decision-making process and institutions. Legalization along with political decision-making process and institutions is also important for the countries. In a similar vein, the rule of law which is also important in terms of obeying the rules, may have effects on economy because of legal transactions. Therefore, it is important to analyse the effect of government effectiveness and the rule of law on the economy. In this study, the effect of government effectiveness and rule of law on economic growth for European Union transition economies was investigated by panel data analysis method over the period of 2002-2018. In the result of the study, it was concluded that government effectiveness had a positive effect on economic growth, but the rule of law had no statistically significant effect on economic growth. Moreover, the results indicate unidirectional causality from government effectiveness to economic growth and bidirectional causality from the rule of law and economic growth.

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