Explaining growth in Armenia: pivotal role of human capital

Explaining growth in Armenia: pivotal role of human capital

Transition in Armenia: an interdisciplinary exploration

The paper investigates sources and determinants of long run growth in Armenia concentrating on the growth path during the period of transition to market economy. It evaluates empirical relationships between the rates of growth and total factor productivity growth, physical and human capital accumulation, as well as institutional change and initial conditions. Country-specific circumstances of transition recession and factors of following growth are revealed in cross-country comparisons.

This paper is an attempt to explain economic growth using interdisciplinary approach extending economic analysis with political, geographic, sociological, psychological, and historical facts and considerations.

Results of data analysis showed a positive and significant effect of formal education on productivity growth. Educational levels, growth in educational attainment, and interaction effects between schooling and R&D were found to be significant determinants of country’s growth in past and present.

The paper argues that steady economic growth recorded during last few years is a partial reflection of economic activity after sharp economic decline occurred at the beginning of transition, market reforms introduced at early stages of transition, and strangely favorable outcome of seemingly biased stabilization policy (focused mainly on monetary reform) implemented since 1994.