Abstract   This paper presents an alternative empirical approach for evaluation of the institutional system's development in transition economies and the impact it has on economic performance. We suggested an operational indicator of institutional system dynamics to observe the “institutional reforms-economic growth” interdependence in transition economies. The empirical work reveals a certain dependence between institutional development and economic recovery. An application of the approach to the problems of international economic integration of transition economies in the context of EU accession allows us to assess the role of democratization and the rule of law in particular.