Deindustrialisation in post-Soviet economies: premature deindustrialisation, Dutch disease, human capital, and institutions

ABSTRACT

This study examines deindustrialisation in 15 post-Soviet economies by investigating the country-specific fixed effect in the relationships among manufacturing, population, and income and the factors contributing to deindustrialisation in terms of the premature deindustrialisation hypothesis. The fixed-effect estimation suggests deindustrialisation in the ten middle-income post-Soviet countries due to their comparative disadvantages in manufacturing as the overall contributor, with the lack of human capital, the Dutch Disease effect (mainly in Azerbaijan, Kazakhstan, the Russian Federation, and Uzbekistan), and immature institutions (mainly in Kyrgyz, Tajikistan, Ukraine, and Uzbekistan) as sub-factors that explain deindustrialisation in these countries based on factor analyses.

KEYWORDS:

• Deindustrialisation
• post-Soviet economies
• Dutch disease
• human capital
• institutions
• manufacturing

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Turkmenistan is not included due to the lack manufacturing data.

2. The Hausman specification test also supports the choice of a fixed-effect model as the Chi-Sq. statistic of 75.113 rejects the random-effect model by over 99%.

3. Although Korea also shows a manufacturing-driven development path, we exclude it from the benchmark because its manufacturing GDP ratio is beyond those of China and Japan (Figure 1).

4. The sample period excludes the 1990s to avoid the economic turbulence after the independence of the post-Soviet countries and the repercussion of the Russian economic crisis in 1998.

Additional information

Funding

The authors have no funding to report.