The main goal of this doctoral thesis is to investigate the impact of formal institutions on the structure of investments, in 22 European countries in the period 2011-2017. One of the main challenges of studying the field of institutional economics is related to defining the concept of formal institutions. Namely, the literature review found that there is no consensus on the most appropriate way to define the concept of formal institutions in the economy. The reason can probably be found in the fact that one definition cannot include everything that formal institutions represent. Due to that, this doctoral thesis defines formal institutions as a legislative framework, within which entire economic activity of a certain country takes place, and can be adapted very quickly to new economic circumstances, while being under the government's authority. Furthermore, a literature gap was indentifed in terms of studying the relationship between formal institutions and the structure of investments. Namely, the majority of existing empirical research gave priority to economic growth, entrepreneurship and direct foreign investments, ignoring the potential effect of formal institutions on the structure of investments in the economy. As a result of the identified literature gap, four main hypotheses were formed in this doctoral thesis: H1: The simplicity of starting a business affects the structure of investments, H2: A higher degree of property rights protection significantly affects the increase of total investments in construction, H3: A higher degree of legal enforcement of contracts significantly affects the increase of total investments in construction and H4. The regulatory quality affects the increase of investments in dwellings. Starting with the investment function as a theoretical basis, the results of the panel analysis with fixed and random effects resulted in partial acceptance of hypothesis H1, complete acceptance of hypotheses H2 and H3, and rejection of hypothesis H3. However, in addition to testing the aforementioned hypotheses, the doctoral thesis also includes an additional analysis related to investments in dwellings. By introducing interactive members, research has shown that improving the regulatory quality, along with the simultaneous improvement of the institutional framework in the form of a greater degree of judiciary independence, protection of property rights and legal enforcement of contracts, leads to a significant increase in dwellings investment. The results of the analysis clearly indicate that sometimes the combination of two or more policies by policymakers can produce better effects in the economy than in the case of taking only one measure.