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Complementarities in economic reform

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  • Eric J. Friedman
  • Simon Johnson

Abstract

The authors report on technical work which examines the implications of combining complementarities and convex adjustment costs in a model of economic reform. The main results are that the optimal pace of reform is higher if there is a larger initial crisis, stronger pro‐reform institutions, and greater immediate potential entrepreneurship. This supports the argument that radical reform was appropriate for most countries in Eastern Europe and the former Soviet Union, while gradualism was more appropriate for a country like China.

Suggested Citation

  • Eric J. Friedman & Simon Johnson, 1996. "Complementarities in economic reform," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 319-329, October.
    • Handle: RePEc:bla:etrans:v:4:y:1996:i:2:p:319-329
    DOI: 10.1111/j.1468-0351.1996.tb00175.x
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    References listed on IDEAS

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    1. Dewatripont, Mathias & Roland, Gerard, 1995. "The Design of Reform Packages under Uncertainty," American Economic Review, American Economic Association, vol. 85(5), pages 1207-1223, December.
    2. S. Fisher & R. Sahay & C. A. Vegh, 1997. "Stabilization and Growth in Transition Economies: The Early Experience," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 5.
    3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1992. "The Transition to a Market Economy: Pitfalls of Partial Reform," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 889-906.
    4. Andrew Atkeson & Patrick J. Kehoe, 1993. "Industry evolution and transition: the role of information capital," Staff Report 162, Federal Reserve Bank of Minneapolis.
    5. Casey Ichniowski & Kathryn Shaw & Giovanna Prennushi, 1995. "The Effects of Human Resource Management Practices on Productivity," NBER Working Papers 5333, National Bureau of Economic Research, Inc.
    6. Mr. Stanley Fischer & Mr. Carlos A. Végh Gramont & Ms. Ratna Sahay, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," IMF Working Papers 1996/031, International Monetary Fund.
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    Cited by:

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    2. Brown, J David & Earle, John, 2001. "Privatization, Competition and Reform Strategies: Theory and Evidence from Russian Enterprise Panel Data," CEPR Discussion Papers 2758, C.E.P.R. Discussion Papers.

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