Central Asian countries homogenously suffer from a rather low quality of institutions. Looking at the World Bank Governance Indicators (WBGI), a comprehensive measure of institutional quality including legislative, administrative, and legal aspects, it is evident that Central Asia, together with Belarus, Azerbaijan, and Russia clearly hold the rear end light with respect to institutional quality in post-socialist countries. Only Tajikistan and Kazakhstan figure above CIS average but are still far away from benchmark countries like the Baltic countries or other new EU member states with lower quality of institutions.

So far, bad governance has been explained by either remoteness or resource curse. Remoteness implies that Central Asian countries do not benefit from EU or NATO accession incentives. Resource curse implies that financial inflows stemming from resource exports undermine the potential for reform and transition. However, panel regressions for transition countries reveal that this is not sufficient to explain bad governance in Central Asia. Even considering the factors which are relevant for transition countries, governance should be better although to varying extent within the group of Central Asian countries.

 In the paper, we argue that the decentralization of power in the non-democratic regimes and the interplay with resource curse phenomena may explain why Central Asia suffer from unexpected bad governance and why some countries face a voice/stability trade-off while other don’t. Preliminary results suggest that the voice/stability trade-off is especially relevant for intermediate decentralization while availability of oil revenues and diversified clan structures seem to drive corruption.

Keywords:

Central Asia, Governance, Resource Curse, Decentralization, Panel Regression