ON THE ROLE OF MARKET INSTITUTIONS DURING ECONOMIC TRANSFORMATION PROCESS

Abstract

The paper considers the role market institution in the process of economic transformation. At present stage, the development of the efficient market system implies the creation of the incentive structure that will stimulate businesses to invest in innovation and production activities rather than in ‘rent-seeking’ behavior. Such an incentive structure, in turn, is a product of viable institutions that complement the mechanism of market competition and that guarantee property rights, honour of contracts and payment of credits, lower barriers for market entry and exit, reduce transaction costs and facilitate increase of the effectiveness of the market of production factors.  Only under such conditions economic agents receive the possibility and stimuli for innovation, thus creating preconditions for steady economic growth.