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Growth Patterns in the CIS-8: A Political Economy Approach

  • World Transition Economy Research
  • Published:
Transition Studies Review

Abstract

On the whole GDP growth is usually considered robust in the CIS-8. However, there are remarkable differences in the quality of growth performances between the countries in the region. These differences cast doubts on the sustainability of the recent growth performance in some Caspian/Caucasian countries. This paper tries to develop a basic understanding of the different qualities of growth performance other than GDP growth rates. Therefore, we distinguish between volume-driven and efficiency-driven growth. Taking into account different resource endowments, we identify different patterns of physical capital accumulation and development of Total Factor Productivity (TFP) growth. The results of our fixed effects model indicate that governance has a significant positive effect on TFP and GDP per capita growth, whereas our results for regime type indicate a non-linear relationship. Therefore, we conclude that institutional quality seems to be the major determinant causing efficiency-driven growth and is thus of major importance when assessing the sustainability of growth paths in the region.

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Notes

  1. Commonwealth of Independent States (CIS). CIS-8: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyztan, Tadjikistan, Turkmenistan, Uzbekistan. Due to limited availability of data for Turkmenistan, we exclude Turkmenistan from our regressions and therefore sometimes refer to the CIS-7.

  2. For the calculations of these estimates see Bolle and Meyer (2004).

  3. An economic development strategy might be regarded as sustainable if the society of an economy is capable of establishing institutions and implementing policies, which enable the economy to be more resilient to both internal and external shocks. This in turn implies that governments need to be capable of implementing prudent macroeconomic policies in the short run and maintaining these policies throughout the development process (see amongst others Aghion et al. 2006; Rodrik 2006; Ocampo 2006).

  4. The concept of genuine saving (formerly known as adjusted net saving) was first derived in Pearce and Atkinson (1993) and Hamilton (1994). Genuine saving provides a much broader indicator of sustainability by valuing changes in natural resources, environmental quality and human capital, in addition to the traditional measure of changes in produced assets provided by net saving. Genuine saving is calculated as follows: Gross national saving minus consumption of fixed capital plus current operating expenditures on education (to adjust for investments in human capital) minus the value of natural resource depletion (energy, metals, minerals, and net forest depletion are included) minus the value of damages from pollutants (the pollutants carbon dioxide and particulate matter are included). For a more technical description see Hamilton (2006).

  5. The rentier state theory goes back to the seminal publication of Mahdavy (1970); for an overview see Stevens (2003). Rentier states in their broadest sense are defined as those states ‘that receive on a regular basis substantial amounts of external economic rent’ (Stevens 2003, 428).

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Acknowledgments

Special thanks for excellent research assistance to Martine Perry and Anne Schindler.

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Correspondence to Alexander Salhi.

Appendix

Appendix

See Tables 4, 5.

Table 4 Variable description
Table 5 Summary statistics

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Salhi, A., Kern, A. & Rößler, M. Growth Patterns in the CIS-8: A Political Economy Approach. Transit Stud Rev 17, 686–708 (2010). https://doi.org/10.1007/s11300-010-0176-9

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  • DOI: https://doi.org/10.1007/s11300-010-0176-9

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