Abstract:

Institutions are very important foreconomic and social development since they directly affect individual behaviors. Institutional economists argue that the effectiveness of institutions accelerates economic growth. There are many historical, social and economic factors that determine the level of institutional development. In this study, the effect of the geographical location of the countries on the level of institutional development will be empirically examined. In this direction, the effect of geographical location on the level of institutional development will be analyzed by using 2018 data from 27 European Union (EU) countries. The Rule of Law Index was used as an indicator of institutional development in the analysis. The distance of the countries to each other was taken as a geographical factor. In addition, as control variables, education index, real national income per capita and unemployment rate were included in the model. The analysis revealed that there is a positive interaction between the institutional development levels of the countries and the institutional development level of the neighboring countries. Similarly, as per capita income increases, the rule of law index also increases. It was determined that the level of unemployment was not in a statistically significant relationship with the level of institutional development. Institutional development increases as the level of education increases. As a result, institutional development is increasing in EU countries, geography, countries neighboring countries with a high level of institutional development. In addition, the increase in income and education level increases the level of institutional development.

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