Issues Related to the Concept of Formal Institutions

The paper provides a literature review in the form of 52 papers, 12 different databases, and 165 different institutional variables, which can be a useful first step for future authors in exploring the phenomenon of formal institutions. Considering the complexity of the concept and differences that exist between formal and informal institutions, it is easiest to define formal institutions as a legislative framework managed by the government of a particular country, which can be changed and adapted in the short and medium term. The aim of this paper is to highlight the basic problems associated with defining, measuring and conducting empirical research in the field of institutional economics. In addition, possible obstacles and solutions to the problems of subjectivity, multicollinearity and endogeneity, which are often not sufficiently considered by authors in academic research on formal institutions, are identified. Finally, an overview of basic remarks on databases enables authors to more easily select the most appropriate database for their potential future research.