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Government Distributional Concerns and Economic Policy During the Transition from Socialism

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  • Gordon, Roger H
  • Li, David Daokui

Abstract

Before the transition governments had strong distributional objectives, which they pursued mainly by direct controls over state enterprise wage rates and hiring decisions, yielding a highly compressed wage distribution. During the reform they maintained similar controls over state enterprises, but had to take into account competition from the new non-state sector that was mostly free from these controls. Based on these distributional considerations alone, we forecast: 1) an immediate and continuing decline in the skills of workers in the state sector as the most able workers leave; 2) higher productivity in the non-state sector, which consists of the most able workers; 3) accounting losses in the state sector, reflecting the transfer of tax revenue to finance payments to the unskilled previously financed within the firm; and 4) restructuring within the state sector to reduce the distortions to relative wage rates. These phenomena are broadly observed across all transition economies.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1662.

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Date of creation: Jun 1997
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Handle: RePEc:cpr:ceprdp:1662

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Related research

Keywords: Economic Transition; Government In Transition; labour productivity in transition; policy during transition; Redistribution; Wage Structure;

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Cited by:
  1. John Litwack & Yingyi Qian, . "Balanced or Unbalanced Development: Special Economic Zones as Catalysts for Transition," Working Papers 97044, Stanford University, Department of Economics.
  2. Maria Csanadi, 2001. "A Model Explaining Social and Political Change of Party-states Structural and Dynamic Background of Similarities and Differences in Reproduction, reforms, Collapse and Transformation," IEHAS Discussion Papers 0101, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Maria Csanadi, 2009. "The metamorphosis of the communist party: from entity to system and from system towards an entity," IEHAS Discussion Papers 0904, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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