The great divide revisited

The former socialist countries of South East and Central Europe exhibit great variation in institutional quality. Unlike the sparse existing literature, I claim that the variation can be explained by the legacies of the Ottoman and Habsburg Empires. I identify historical legacies of the Empires, which have affected the current institutional quality of the successor states. I show empirically that the Empires\u27 legacies are key determinants of institutional quality, and that the Habsburg successors have institutions that are more efficient in a market economy than the Ottoman successors. In contrast, I findan insignificant effect of socialism on institutional quality