This paper focuses on institutions within the field of New Institutional Economics. The paper sets up a common framework for examining institutions, and then uses this framework to depict the dynamics of the institutional environment in Slovenia, both in an international comparison as well as within the country. The different classifications systems for institutions are presented and discussed, and then the empirical proxies for institutions are clustered within the most suitable classification system, which sorts institutions into three homogenous institutional groups: legal, political and economic institutions. Within each group, we calculate the latent institutional factors for all European countries, which denote the quality of institutions, and use these factor scores to rank Slovenia on the European quality of institutions index (EQII) in each year. The results show that Slovenia is stagnating in an international comparison of economic institutions, while it is slowly loosing competitiveness in political institutions. The worst result is seen in the dynamics of legal institutions, where the loss of international competitiveness for Slovenia is the quickest and largest. The results of institutional dynamics within Slovenia imply that economic and political institutions are worsening only relatively in comparison to other countries, but are improving absolutely within the country, while the legal institutions are both worsening relatively to the others, as well as absolutely within the country. Furthermore, this paper confirms the mainstream public perception of a poorly functioning legal state, as the quality of legal institutions in Slovenia is declining relatively - internationally, as well as absolutely - within the country, which is a cause of utmost concern.
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