External liberalization, specialization, and institutional change in times of globalization: the case of central, east and southeast Europe

Abstract

During the early nineties, central, east and southeast European countries set on liberalizing their economies on an unprecedented scale, including more or less speedy or profound external liberalizations in country-specific approaches. Since then, we have observed increasingly differentiated changes in these countries' legal institutions. Based on a small but growing literature, we may conjecture that both observations do not only describe a chronological sequence but a causal relationship. This note discusses this conjecture and argues that the globalization of production processes acts as a channel in this causal relationship. Whether or not trade liberalization helps in improving countries' domestic legal institutions depends on the nature of openness emanating from liberalization: some countries firms' joined fragmented, globalized production processes, for others, the dependence on primary products even increased.