Ukraine: The Cost of Weak Institutions

29 Pages Posted: 26 Jul 2006

See all articles by Andrew Tiffin

Andrew Tiffin

International Monetary Fund (IMF)

Date Written: July 2006


Ukraine has the potential to be a very wealthy country. It has a well-educated workforce, some of the best agricultural land in the world, an enviable supply of hydrocarbons and minerals, and a relatively well-developed infrastructure. Despite these advantages, however, Ukraine's per capita income remains low. Using a cross-country stochastic-frontier framework, this paper argues that Ukraine's failure to tap its full potential is mainly a result of its market-unfriendly institutional base. With an inherited Soviet framework that is ill suited to the needs of a market economy, Ukraine has been slow to establish the institutions needed to use its resources efficiently. The paper provides a quantitative guide to the benefits, in terms of potential output, of further structural reform. Looking forward, the study finds that durable growth in Ukraine will depend primarily on the authorities' ability to implement their ambitious reform agenda, and thereby to help secure the basic foundations of a modern market economy.

Keywords: Total factor productivity, stochastic frontiers, technical efficiency, institutions, transition economies

JEL Classification: C23, O33, O47, P27

Suggested Citation

Tiffin, Andrew, Ukraine: The Cost of Weak Institutions (July 2006). IMF Working Paper No. 06/167, Available at SSRN:

Andrew Tiffin (Contact Author)

International Monetary Fund (IMF) ( email )

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