According to institutional economics, economics is an interdisciplinary branch of science. When examining economic events, a number of analytical tools or concepts from various disciplines in social sciences, business and law are used. Non-economic factors are accepted as determinants of economic welfare. Institutional economics addresses two overarching issues: What are the determinants of institutions? And what is the effect of institutions on economic growth? The institutional economics school of thought offers an alternative perspective to today's established economics in reducing or eliminating economic development differences between countries. Economic and political institutions can support economic growth because they shape the incentives of economic actors in the market and affect investments in technology and physical and human capital.

The purpose of this study is to investigate the effect of institutional performance, which is accepted as the determinants of economic welfare from the perspective of institutional economics, on economic growth. In line with this purpose, the study conducted on Turkey and EU countries concluded that institutional performance has a positive effect on economic growth. Improvements in institutional performance lead to economic growth. Developing countries like Türkiye will be able to increase economic welfare through better institutional performance by restructuring their institutions.