The impact of institutional quality on economic growth: Evidence from post-Soviet countries

Abstract

The paper investigates the long-run impact of the institutional environment on economic growth for the sample of post-Soviet countries in 1996-2021. Using the Autoregressive Distributive Lag Model, we found that a U-shaped link exists between institutional quality and economic growth. Regarding the institutional quality dimensions, a similar link was observed for four out of six factors (POLSTAB, GOVEFF, RULELAW, CONTCORR). In contrast, the other two dimensions (REGQUAL, VOACC) exhibited inverted U-shaped impact on the dependent variable. Moreover, findings provide insight into the impact of control variables such as inflation (INF), openness (OPE), and population growth rate (POPGROWTH) on economic growth. More precisely, openness was found to have positive impact on the dependent variable, while inflation and population growth rate both had negative effect on economic growth. Based on these results, the paper suggests some policy implications for post-Soviet countries in terms of achieving economic growth by improving the institutional quality environment.