Post-Soviet Trade and Institutional Quality: Subnational Evidence

The paper aims to investigate the impact of the dependence on the post-Soviet trade on the quality of economic institutions in the Russian subnational regions. For this purpose, it uses two approaches: it looks at how the effect of post-Soviet trade on growth changes over time (hypothesizing that if one observes the decline of this effect, the latter is more likely to be driven by the legacy of the Soviet economy and thus less conducive for the improvement of institutional quality) and at the correlation of post-Soviet trade and quantitative indicators of the quality of economic institutions. The results suggest that the post-Soviet trade is more likely to have a positive impact on the institutional change. Specifically, I find that regions of Russia with a larger share of the post-Soviet trade in the total international trade turnover, are characterized by persistently higher growth rates than other regions throughout the period of investigation (2001–2012). Furthermore, I find that the quantitative measures of the quality of economic institutions in the Russian regions exhibit, if any, a positive correlation with the share of the post-Soviet trade. The effect observed could be linked to the complexity of the regional economies and to the substantial presence of new market-based ties in the post-Soviet trade flows