Minds for the Market: Non-cognitive Skills in Post-soviet Countries

Abstract: We analyze the effect of socio-political and economic institutions on the development of non-cognitive skills of people. We exploit the breakdown of the Soviet Union as a quasi-natural experiment, and apply a difference-in-difference strategy. We focus on two post-Soviet countries, Armenia and Georgia, and compare personality traits of individuals that were born much before the collapse of the Soviet Union with those that were born shortly before or later, relative to individuals from other developing countries that had not gone through the same institutional changes. After controlling for various individual characteristics and year of birth fixed effects, we find significantly lower scores of extraversion, openness, stability, and grit, and higher scores of hostility of people that lived considerable amount of time under the communist regime. Our findings suggest that institutions can shape the non-cognitive skills of individuals, and thus highlight a channel, through which institutions impact economic development.