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An Application of the Growth Diagnostics Framework: The Case of Georgia

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  • Yaroslava Babych

    () (International School of Economics at Tbilisi State University)

  • Michael Fuenfzig

    () (International School of Economics at Tbilisi State University)

Abstract

This paper applies the Growth Diagnostics framework and attempts to identify the binding constraints to economic growth in Georgia. While many policies potentially promote economic growth in practice only policies that relax the binding constraint do so. In contrast, policies that relax non-binding constraints will by definition do little or nothing to promote economic growth. This study builds on an existing growth diagnostics exercise by the Government of Georgia and the Millennium Challenge Corporation, but comes to different conclusions. The existing study found that human capital and road infrastructure are binding constraints to economic growth in Georgia. In contrast, we find that lack of property rights, broadly interpreted, is the binding constraint to economic growth in Georgia. We argue that lack of property rights is unlikely to be the risk of expropriation. Instead, property rights have to be interpreted broadly, and encompass issues such as political and institutional stability, regional conflicts, the rule of law, and judicial independence.

Suggested Citation

  • Yaroslava Babych & Michael Fuenfzig, 2012. "An Application of the Growth Diagnostics Framework: The Case of Georgia," Working Papers 001-12, International School of Economics at TSU, Tbilisi, Republic of Georgia.
  • Handle: RePEc:tbs:wpaper:12-001
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    Cited by:

    1. Gabrisch, Hubert, 2014. "The binding constraint on growth in less developed Western Balkan countries," MPRA Paper 60020, University Library of Munich, Germany.
    2. Lasha Labadze & Mirian Tukhashvili, 2013. "Costs and Benefits of Labour Mobility between the EU and the Eastern Partnership Partner Countries. Country report: Georgia," CASE Network Studies and Analyses 0463, CASE-Center for Social and Economic Research.
    3. Dragan TEVDOVSKI & Vladimir FILIPOVSKI & Igor IVANOVSKI, 2014. "A Diagnostics Approach To Economic Growth In Small Open Economies: The Case Of The Republic Of Macedonia," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 13, pages 47-68, June.
    4. Meerim Sydykova, 2015. "Diagnosing Growth Constraints in Central Asia: The Case of the Kyrgyz Republic," ERSA conference papers ersa15p1626, European Regional Science Association.
    5. Maya Grigolia & Lasha Labadze & Pavol Minarik & Alena Zemplinerova & Marek Vokoun, 2015. "Transfer of Know-how for SMEs in Georgia, Moldova and Ukraine. White Paper: Georgia," CASE Network Reports 0123, CASE-Center for Social and Economic Research.

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