Growth in transition: Reexamining the roles of factor inputs and geography

In this paper we re-consider the role of factor inputs in determination of long-run growth for transition countries. For this purpose, we estimate cross-sectional growth equations using spatial econometric models. Investments in physical and human capital are found to be significant growth factors for the period after 1994. The estimated coefficients are very similar to those obtained in the literature for developed market economies. We also find evidence for spatial autocorrelation of growth, due mostly to the wars and financial crises in the region. Correction for such correlation increases the significance of the explanatory variables.