This paper analyzes factors that determine recent economic growth in the low-income countries of the Commonwealth of Independent States.2 The main findings are as follows: (1) productivity gains in export-oriented sectors and expansion of exports may have become the main sources of growth in five of the seven CIS-7 countries, while in the early years of transition the output recovery was mainly driven by consumption; (2) economic growth has concentrated in agriculture and the raw material sectors, and, thus, is vulnerable to changes in external conditions; and (3) structural reforms matter for growth, which is consistent with previous research on growth in transition countries.
This paper analytically explores and empirically tests a number of hypotheses to explain the rapid growth in transition economies. Using the latest panel data, the paper finds that growth in transition economies has been higher because of the recovery of lost output, progress in market reforms, and favorable external conditions. These results are consistent with estimates from the global sample that includes 123 countries, and are robust to instrumental variable estimations and other robustness tests. A general implication of the findings is that some of the factors behind the rapid growth are unlikely to continue for a very long time and that the challenge would be to further improve the investment climate, which will require broadening the scope of macroeconomic reform into a second generation of reforms encompassing structural and institutional areas.