Measuring Impact of Institutional Environment and Government Effectiveness on Economic Growth Through Channel of Scientific and Technological Progress: Case of Russia

Current research provides a new link to measure direct impact of institutions & government effectiveness on economic growth. In particular, such an impact is measured through channel of technical and scientific progress, which is one of the main sources of novelty of the study, proposed by author, which makes it different from other researches in the same field, which measured impact of institutions either at aggregate level or through channels different from STP. Motivation to conduct this study comes from the fact that science and technology are main sources of economic development and institutions provide environment for such development, as a result, author wanted to measure direct impact of institutions, in addition to indirect effect of institutional environment that has influence on many aspects of economy, to finally get total effect. Other important, however less crucial distinction from previous works include considering more proxies for STP and institutions to get more detailed results. Study was performed for Russian Federation through years 1991-2017. Empirical findings were obtained with the help of OLS and TSLS methods, together with Durbin-Wu-Hausman and Granger’s Causality tests. Due to limited sample size many specifications of the model were considered to check stability of estimates. In the study, the results were obtained in favour of the main hypothesis of mitigating institutional impact on the effect of scientific and technical progress in Russia, but due to certain shortcomings of the research in the form of quite small sample and not fully specified model, caused by lack of necessary data for Russia in this topic, author cannot say with full confidence about the correctness and stability of the findings of the paper. Nevertheless, as was stated above, paper provides absolutely new way to measure impact of difficult to measure variable – institutions on well-measurable channel of STP, which finally allows to explicitly measure their impact on economic growth. For such purposes author used production function approach, obtained detailed estimates of interaction between indicators of institutional environment and indicators of scientific and technical progress. Further, research provides brief formal review of potential state policy adjustments to improve situation with scientific and technological sector of Russian economy.