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

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.