Assessment of Institutional Quality in Resource-Rich Caspian Basin Countries

Abstract

Natural resource dependence is believed to have potential impact on institutional devel- opment, and there is growing consensus in the academic literature that institutional weakness is central to the explanation of the negative e¤ects of resource booms. Generally, the quality of institutional framework and natural resource dependence interact mutually. Natural re- sources rents can damage institutions by removing incentives to conduct reforms and even to establish a well-functioning bureaucracy. Also, weak institutional quality is the ultimate cause for a disadvantageous management framework of natural resources and process of convert- ing revenue ows into economic development. This paper examines the connection between institutional quality and resource dependence in resource-rich Caspian Basin countries (Azer- baijan, Kazakhstan, Russia, Turkmenistan) with transition economies. The analysis for the total natural resources rents suggests that, in aggregate, revenues on total natural resources have a negative impact on government e¤ectiveness.