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Europe / Understanding the Transaction Costs of Transition: It's the Culture, Stupid
The purpose of this paper is to show that the interaction between the formal institutions of capitalism and the prevailing culture in former socialist states is a major source of the transaction costs specific to the process of transition. To that end, the author analyses the implications of the interaction between formal and informal rules, the differences between the free-market, private-property economy and the prevailing culture in Central and Eastern Europe, the process by which the transaction costs of transition could be reduced, and the factors upon which that process depends.