Determinants of Economic Development in the Former Soviet Union and Central Eastern European Countries

Abstract

The purpose of this paper is to find factors which affect economic development in former Soviet Union countries and Central Eastern European countries. This paper uses cross-country data for 18 countries from 1999 to 2014. As a measure of development, GDP per capita has been taken, and the GDP per capita is expected to rise under the effect of improvements in economic freedom, a high tertiary enrollment ratio, enhancement of trade, high expenses in research and development, low level government consumption, and low fertility rates. However, the effect of these factors on economic development depends on other factors in the economy. More weight is given to the role of institutions. Economic freedom has been chosen as a proxy of institutions. This study has found that improvements in economic freedom, high tertiary enrollment, and high expenses in research and development are significant for the growth of both groups of countries. Trade and government consumption have been found to be significant for one group, while not significant for another group. Fertility does not show an effect on growth in both groups.