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Rapid Growth in the CIS: Is It Sustainable?


  • Garbis Iradian


This paper analyses some of the main factors behind the recent rapid growth in the Commonwealth of Independent States (CIS) and the prospects for its continuation. Two approaches are used. The first approach uses growth accounting exercises to estimate the total factor productivity (TFP) growth of all transition economies and compare them with other fast-growing economies. The second approach uses panel regression to estimate the determinants of per capita and TFP growth for 90 countries. Both short-run and long run coefficients are estimated using fixed effects, random effects, and two stage least squares (2SLS) econometric techniques. The central conclusion of the study is that the rapid growth of the CIS countries over the past six years has been driven primarily by improvement in labour productivity, increases in capacity utilization, recovery of previously lost output, favourable commodity prices, and large increases in remittances. This strong growth may continue over the next few years. Why? First, the still relatively low real GDP base and low average per capita means that there is more catch-up potential. Second, the recent trend of faster capital accumulation is expected to play a more important role in the medium-term growth. Third, education levels are relatively much higher than in other regions. There is a downside risk, however, arising from the high concentration of exports in a few commodities. The undiversified export structure and the terms-of-trade gains may expose the CIS countries to considerable external risks. The challenge, therefore, will be to improve the investment climate in the non-primary sectors. Improving the investment climate will require further progress in implementing structural reform and strengthening institutional development. The undiversified export structure and the terms-of-trade gains may expose the CIS countries to considerable external risks. As time passes, the share of growth derived from improved resource allocation may diminish gradually and long-term rapid growth will be increasingly dependent on physical and human capital accumulation.

Suggested Citation

  • Garbis Iradian, 2007. "Rapid Growth in the CIS: Is It Sustainable?," wiiw Research Reports 336, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:rpaper:rr:336

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    References listed on IDEAS

    1. Wan, Guanghua, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," WIDER Working Paper Series 101, World Institute for Development Economic Research (UNU-WIDER).
    2. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January.
    3. Vasco Molini & Guanghua Wan, 2008. "Discovering sources of inequality in transition economies: a case study of rural Vietnam," Economic Change and Restructuring, Springer, vol. 41(1), pages 75-96, March.
    4. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975.
    5. Wan, Guanghua, 2004. "Accounting for income inequality in rural China: a regression-based approach," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 348-363, June.
    6. Ernesto Savaglio, 2006. "Multidimensional inequality with variable population size," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(1), pages 85-94, May.
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    Cited by:

    1. Roman Mogilevsky & Anara Omorova, 2011. "Assessing Development Strategies to Achieve the MDGs in Asia. Macroeconomic Strategies of MDG Achievement in the Kyrgyz Republic," CASE Network Reports 0095, CASE-Center for Social and Economic Research.

    More about this item


    growth; TFP; remittances; institutions;

    JEL classification:

    • F1 - International Economics - - Trade
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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