Yuri Pleskachev Senior Researcher at the Gaidar Institute's Quantitative Analysis of Economic Effects Department, explained one of the fundamental questions of economics: what factors determine long-term growth—the quality of institutions, geographical conditions, or cultural characteristics. He noted that modern research does not provide a clear answer, and that economic dynamics are formed at the intersection of all three groups of factors.
The expert explained that institutions form the structure of incentives for investment, defining property rights and contract protection. However, empirical studies show that the impact of institutional indicators varies significantly between groups of countries: the same reforms produce different results in high- and low-income countries. He noted that universal models for assessing institutional reforms often overestimate the effect of formal changes.
Yuri Pleskachev also emphasized that geography shapes the initial conditions but does not predetermine the level of development. Climate, access to sea routes and external markets, resource base, and epidemiological situation influence the initial trajectories of territory development and the formation of institutions. Nevertheless, countries with comparable geographical characteristics differ significantly in terms of income levels and growth rates. Geography is an important structural factor, but it explains only part of the variation between countries.
Culture and informal practices change how formal institutions work, the expert noted. He explained that the level of trust, attitudes toward the law, and models of cooperation directly influence economic decisions. Culture determines how quickly society accepts new rules, how legitimate reforms are perceived, and how formal norms are transformed into real practices. In a number of studies, cultural variables explain differences in economic outcomes as well as, and sometimes better than, aggregate indices of institutional quality.
Yuri Pleskachev noted the main drawback of universal models: their disregard for the complementarity of factors. Classic cross-country regressions sought to answer the question, “Which is more important: institutions or geography?” But such approaches suffer from measurement errors, endogeneity, underestimation of context, and the fact that informal institutions are virtually absent from standard metrics and indices. Recent international reviews show that institutions, geography, and culture act as complementary elements, and their impact on growth varies depending on the stage of economic development and the nature of structural shifts.
The expert concluded that geographical constraints are more pronounced in the early stages, while the role of institutions and cultural characteristics, such as trust and risk appetite, increases as the economy becomes more complex. Thus, long-term growth is the result of the alignment of the institutional, cultural, and geographical environment, rather than the consequence of a single dominant factor.