Structural Change in Transition Economies: Does Foreign Aid Matter?
AbstractThis paper addresses whether the initial declines in the manufacturing and real wages in transition economies were anything unexpected to justify policy reversal, and whether the “often-recommended” foreign aid would have helped them curb these declines in any significant way. It answers these questions with the help of a two-sector three-factor small open economy model and simulation exercises. It concludes that, given the relative price distortions and the market disequilibria that transition economies inherited from their planning era, the initial declines in their manufacturing and real wages are to be mostly expected. Foreign aid, whose impact is noticeable only when it is in excess of 5% of GDP, does not curb the decline in their real wages in any measurable way and exacerbates the decline in their manufacturing by a few percent.
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Bibliographic InfoPaper provided by Economic Growth Center, Yale University in its series Working Papers with number 982.
Length: 23 pages
Date of creation: Sep 2009
Date of revision:
liberalization; structural adjustment; transition economies; East European economies; Soviet Republics; foreign aid;
Find related papers by JEL classification:
- P2 - Economic Systems - - Socialist Systems and Transition Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-05 (All new papers)
- NEP-CIS-2010-02-05 (Confederation of Independent States)
- NEP-TRA-2010-02-05 (Transition Economics)
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