Impact of European integration on institutional development

Abstract

This paper investigates institutional development induced by European integration. We estimate a dynamic panel data model wherein institutional development is measured as positive changes in the Worldwide Governance Indicators, which are explained by the status of the European countries, for example, being a member of the euro area or an EU member state or a candidate country of the European Union, and additional controls. We confirm a positive effect arising from prospective EU membership, although being an EU member state does not influence the institutional development path. For members of the euro area, there is robust evidence for institutional deterioration in one particular area, namely control of corruption.