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Dualism and growth in transition economies: a two-sector model with efficient and subsidised enterprises

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  • Luigi Bonatti
  • Kiryl Haiduk

Abstract

We develop a growth model distinguishing between a private sector that generates learning-by-doing and technological spillovers and a sector of technologically obsolete and subsidised state-owned enterprises. This distinction allows us to trace the inescapable dual-economy stage of development observed in transition economies. While in some of them this stage was rather brief, laggard reformers continue to display this pattern. The model predicts that the larger the initial fraction of the workforce employed in the obsolete sector and the stronger the politico-ideological hostility towards reform, the lower will be the speed of convergence to the income level of the most advanced countries.

Suggested Citation

  • Luigi Bonatti & Kiryl Haiduk, 2014. "Dualism and growth in transition economies: a two-sector model with efficient and subsidised enterprises," Post-Communist Economies, Taylor & Francis Journals, vol. 26(1), pages 1-16, March.
    • Handle: RePEc:taf:pocoec:v:26:y:2014:i:1:p:1-16
    DOI: 10.1080/14631377.2014.874222
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    1. World Bank, 2010. "Belarus - Industrial Performance Before and During the Global Crisis : Belarus Economic Policy Notes : Note No. 2," World Bank Publications - Reports 2908, The World Bank Group.
    2. World Bank, 2012. "Belarus Country Economic Memorandum : Eeconomic Transformation for Growth," World Bank Publications - Reports 12663, The World Bank Group.
    3. World Bank, 2010. "Belarus - Industrial Performance Before and During the Global Crisis : Belarus Economic Policy Notes - Note No. 3," World Bank Publications - Reports 2907, The World Bank Group.
    4. World Bank, 2010. "Belarus - Industrial Performance before and During the Global Crisis : Belarus Economic Policy Notes - Note No. 1," World Bank Publications - Reports 2906, The World Bank Group.
    5. Martin Myant, 1993. "Transforming Socialist Economies," Books, Edward Elgar Publishing, number 330.
    6. Khaled Sherif & Michael Borish & Alexandra Gross, 2003. "State-owned Banks in the Transition : Origins, Evolution, and Policy Responses," World Bank Publications - Books, The World Bank Group, number 14851, December.
    7. repec:zbw:bofitp:2004_007 is not listed on IDEAS
    8. International Monetary Fund, 2000. "Belarus: Recent Economic Developments," IMF Staff Country Reports 1999/143, International Monetary Fund.
    9. Codrina Rada, 2007. "A growth model for a two-sector economy with endogenous productivity," Working Papers 44, United Nations, Department of Economics and Social Affairs.
    10. International Monetary Fund, 2002. "Belarus: Selected Issues," IMF Staff Country Reports 2002/022, International Monetary Fund.
    11. Lewis, Arthur, 1980. "Autobiography," Nobel Prize in Economics documents 1979-4, Nobel Prize Committee.
    12. World Bank, 2013. "Belarus Public Expenditure Review : Enhancing Public Services in Times of Austerity," World Bank Publications - Reports 13209, The World Bank Group.
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    Cited by:

    1. Sadik-Zada, Elkhan Richard, 2023. "Resource rents, savings behavior, and scenarios of economic development," Resources Policy, Elsevier, vol. 81(C).

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