Institutional quality and economic growth in the non-EU post-Soviet countries: Does energy abundance matter?

Abstract

ABSTRACT. After regaining independence, most of the post-Soviet countries encountered socio-economic difficulties during the transition period. These challenges were also accompanied by low institutional quality. Some of the post-Soviet countries, such as Russia, Turkmenistan, Kazakhstan and Azerbaijan, can be categorized as energy-rich, while the remaining countries are non-rich in terms of energy. Thereby, the aim of this study is twofold: first, to analyze the impact of institutional quality on economic growth in the case of non-EU post-Soviet countries, and second, to determine whether there is any difference in the link of institutional quality and economic growth between the energy-rich and non-rich sample countries. Two-Stage Least Squares reveal a U-shaped association between institutional environment and economic growth. Furthermore, the results suggest that this impact is lower in the energy-rich countries compared with their non-rich counterparts. With regards to the control variables, the findings indicate a positive and statistically significant impact of openness on economic growth. Finally, there is a negative association between the remaining control variables, such as inflation, population growth rate and the dependent variable.