site.btaCouncil for Economic Analysis: Bulgaria's Accession to OECD Could Improve Institutional Quality, Boost Trade

Bulgaria's potential membership in the Organization for Economic Cooperation and Development (OECD) would improve the country's institutional framework, according to a policy brief published Friday by the Bulgarian Council for Economic Analysis under the Council of Ministers. The analysis shows that joining the OECD would also have a positive indirect impact on Bulgaria's trade flows and reputation, which could help attract more foreign direct investments (FDI).

The authors of the study are BCEA members Plamen Nenov, Jeffrey Nilsen, Yoto Yotov, as well as Stefani Stefanova, junior associate of the BCEA.

This policy brief investigates some of the main economic effects connected to OECD accession, particularly for countries comparable to Bulgaria, such as OECD members from Eastern Europe. For countries with lower pre-accession institutional quality – such as the Visegrad group before they entered the EU – OECD accession leads to persistent improvements in rule of law, control of corruption, and regulatory quality. These findings bode well for Bulgaria, whose recent indicators for control of corruption and the rule of law are lower than the corresponding Visegrad levels before the OECD accession of these countries. Accession is thus expected to bolster Bulgaria’s institutional quality.

Beyond institutional convergence, there are also positive effects on trade volumes, particularly in countries, such as the Visegrad group and the Baltic states, that share historical and economic similarities with Bulgaria. Although the OECD does not explicitly reduce trade costs between members, higher quality institutions indirectly help expand trade. Bulgaria, with its distinct comparative advantages, is likely to benefit from such growth in trade.

Regarding Foreign direct investment (FDI) flows, Eastern European countries that joined the OECD before entering the EU, like those in the Visegrad group, saw notable FDI increases. These are likely linked to institutional improvements. In contrast, nations that entered the EU first, such as Slovenia and the Baltic states, did not experience significant FDI growth after OECD accession.

The analysis concludes that, besides measurable institutional improvements, OECD membership offers a reputational boost that helps attract more FDI. Overall, the report shows that joining the OECD could bring economic benefits to Bulgaria in terms of enhanced institutional quality, increased trade, and higher FDI.

The main recommendation of the report is for the Bulgarian Government to continue its efforts to meet the OECD's institutional standards in a timely manner.