State Capture and the Limits of Human Capital: Education and Institutional Quality in Post‐Socialist Europe

ABSTRACT Using the European Quality of Government Index across 183 NUTS‐2 regions (2010–2024), this paper documents that education improves institutional quality in Western Europe but not in postsocialist regions. Oaxaca–Blinder decomposition reveals that 77 percent of the West–East institutional gap reflects different returns to education, not different levels. Triple interaction models identify state capture as the blocking mechanism: where executive corruption is high, education's effect is nullified. Quasi‐experimental evidence from democratic backsliding in Hungary and Poland confirms that intensified capture causes institutional decline. Education improves governance only where accountability channels remain open.