||The empirical tests of the Olson's (1982) theory of institutional sclerosis are customarily based on statistical relationship of certain sclerosis proxies and a chosen measure of economic growth. In majority of cases, the results are ambiguous and open-ended no matter how the sclerosis is approximated or which econometric methods are applied. This paper proposes an alternative methodological procedure for empirical verification of the theory, focused on testing the microeconomic foundation of Olson's theory. Specifically, it concentrates on methodology of testing the "transmission mechanism" of the impact institutional sclerosis can have on the growth. Besides, the paper outlines briefly some implications of the theory on current microeconomics and on economic policy in order to provide motivation of the theory's empirical verification.