Much has happened in the three countries of the South Caucasus-namely,
Azerbaijan, Georgia, and Armenia-since the collapse of the Soviet Union.
Political events, institutional reforms, and economic development have
resulted in greater economic welfare in these countries after the painful
transition period of the 1990s. However, it remains to be seen whether they
have achieved any solid results or whether they still have much to
accomplish. While the answer is ambiguous, each country has followed a
different political, geopolitical, economic, and institutional path and
achieved different economic outcomes despite their close geographical
proximity to each other. This paper compares the available data on economic
and institutional quality in Azerbaijan, Georgia, and Armenia to portray
the overall situation in terms of changes in institutional patterns. Then,
special attention is given to Azerbaijan, as the country is considered to
be oil-rich and thus resource-dependent. A comparative perspective on
institutional quality suggests that Georgia has been a leading country in
terms of institutions and effective bureaucracy-building, despite having
lower economic indicators compared to Azerbaijan. Moreover, while Armenia
is positioned between Georgia and Azerbaijan in terms of institutional
quality, its economic growth is similar to Georgia's. Lastly, institutional
variables (e.g., control of corruption, rule of law, and government
effectiveness, and human rights) in Azerbaijan are negatively correlated
with oil-related variables. This result aligns with the natural resource
curse and Dutch disease theories, which posit that oil boom periods in
mineral-rich countries are associated with a deterioration in institutional
quality, thereby leading to slower growth. Also, the results are important
to build up analytical frameworks to address the Dutch disease or resource
curse studies in the case of Azerbaijan in a comparative manner with
oil-poor countries even if the scope is limited to the South Caucasian
former Soviet Union countries.