Abstract

This paper explores the relation between Moldova’s institutions, entrepreneurship, and poor economic performance 18 years after socialism. The prevailing local institutions determine the direction of entrepreneurship in society (North, 1990; Baumol, 1990; Olson, 1996; Boettke, 1998). Societies with a mix of institutions favorable to productive entrepreneurship experience sustained growth. Conversely, societies with institutions rewarding unproductive and destructive entrepreneurship experience economic stagnation. Using the conceptual frameworks of new institutional economics, Austrian market process theory, and interviews with local entrepreneurs, I explore the link between Moldova’s institutional context and the local entrepreneurship and underdevelopment. For a better understanding of Moldova’s poor economic performance after socialism, scholars and policy makers must investigate the existing underlying gap between the de jure and the de facto institutional barriers to productive entrepreneurship.

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