Chapter 6: Explaining growth in Armenia: the pivotal role of human capital
Heghine Manasyan and Tigran Jrbashyan 1. INTRODUCTION TO ARMENIA: ANCIENT LAND, NEW DIRECTION Armenia is one of the countries of Southern Caucasus. It gained independence in 1991 after the collapse of the USSR and started to implement political and economic reforms aimed at the establishment of a marketoriented democratic society. This study aims to explain growth patterns of the country focusing on the special features of its development and composition of its economy. Armenia’s relatively high ranking in the human development index (72nd compared with 98th in per capita GDP PPP, Table 6.1) is due to the relatively high educational level of the population, a factor that helped to cushion the most negative initial impacts of the transition. The Wall Street Journal ranked Armenia in 45th place in its economic freedom index, that is, as one of the fastest reformers. During the last decade Armenia experienced numerous drastic changes. Economic recovery started in 1994 and continued to 2001 with an average annual growth rate of 5.9 per cent. Even so, while by 2001 Armenia’s GDP recovered to a little less than threequarters of its 1989 level, this quantitative indicator does not fully reﬂect the dramatic decline in the quality of life and social cohesion, and in belief in the future. Among the issues yet to be understood are the factors behind the long-term development trends. In this chapter we present data on longrun growth trends of the Armenian economy, analyse the factors behind it and the reasons for the...
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