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Faculty of Economics, University of Kragujevac , Kragujevac , Serbia
Academy of Technical & Applied Studies Belgrade , Belgrade , Serbia
Educons University , Kamenitz , Serbia
Faculty of Business Studies, Educons University , Kamenitz , Serbia
This paper develops a Composite Institutional Index (InstIndex) as a synthetic measure of the development of inclusive institutions, based on five Worldwide Governance Indicators dimensions: Control of Corruption, Government Effectiveness, Regulatory Quality and Rule of Law, Voice and Accountability. The index is calculated as a simple arithmetic mean of the five dimensions, min–max normalized to a 0–100 scale, for the 1998–2024 period. A comparative analysis is conducted for the five Western Balkan countries (WB5: Serbia, Montenegro, North Macedonia, Albania, and Bosnia and Herzegovina) and the EU27 average, with emphasis on three reference years: 2004, 2014, and 2024. Findings reveal a structural and persistent institutional gap: the WB5 average in 2024 is 47.92, compared with 71.39 for the EU27 – a relative gap of approximately 33%. Sigma-convergence indicates internal homogenization within WB5 (standard deviation declining from 7.37 to 4.78) with no convergence toward the EU27. Beta-convergence regression confirms absolute convergence across the full 32-country sample (β = −0.0096, p < 0.01), with an implied convergence rate of only 1.07% per annum and a half-life of about 65 years. A robustness check using Principal Component Analysis produces an index almost perfectly correlated with the baseline (r ≈ 1.00), confirming that conclusions are not sensitive to the weighting scheme.
inclusive institutions, Western Balkans, European Union, Worldwide Governance Indicators, composite index, beta convergence, PCA.
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