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The determinants of economic growth of transition economies: Economic reform versus initial conditions

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  • Young-Sun Lee
  • Hyung-Gon Jeong
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    Abstract

    This study analyzes factors for economic recovery of transition economies in Europe and the Commonwealth of Independent States for the period of the 1990s. Covariance structure analysis is employed to estimate the structural equation system, and exploratory factor analysis is conducted to measure initial conditions and economic policy as latent variables. The result of analysis shows that the effect of initial conditions is negative and the impact of economic reform on growth is positive. However, the negative effect of initial conditions had overridden the positive impact of economic policy as of 2000. The reason that transition economies could not recover their pre-transition GDP level (even after ten years of transition history) seems to stem from the negative influence of initial conditions on growth rather than the slow speed of economic reform.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730600699572
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 20 (2006)
    Issue (Month): 2 ()
    Pages: 241-252

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    Handle: RePEc:taf:intecj:v:20:y:2006:i:2:p:241-252

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    Web page: http://www.tandfonline.com/RIEJ20

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    Related research

    Keywords: Transition economy; growth; economic reform; covariance analysis; initial conditions;

    References

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    1. de Melo, Martha & Denizer, Cevdet & Gelb, Alan & Tenev, Stoyan, 1997. "Circumstance and choice : the role of initial conditions and policies in transition economies," Policy Research Working Paper Series 1866, The World Bank.
    2. Saso Polanec, 2004. "Convergence at last? Evidence from Transition Countries," LICOS Discussion Papers 14404, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    3. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    4. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    5. World Bank, 2002. "World Development Indicators 2002," World Bank Publications, The World Bank, number 13921, January.
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