Missing social capital and the transition in Eastern Europe

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Missing social capital and the transition in Eastern Europe

Author Info

Paldam, Martin () (Department of Economics)
Svendsen, Gert Tinggaard () (Department of Economics, Aarhus School of Business)

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Gert Tinggaard Svendsen

Abstract

The transition of the »Old Communist« countries of East and Central Europe has been disappointingly slow given the amount of physical and human capital available at the start of the

transition. We argue that this slowness is caused by the lack of social capital, which is an

important factor of production. The Communist system replaced it with an official organization

of society. Further, the communist system needed a set of grey/black networks of »fixers« to give

it the necessary flexibility. These networks were tolerated, but controlled. When the Communist

regime ceased the official organizations collapsed and so did most of the control systems. This allowed a flourishing of the grey/black networks, which can be harmful to the operations of a market economy. The available data are still scanty, but they confirm the argument.

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Publisher Info
Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 00-5.

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Length: 21 pages
Date of creation: 01 Jan 2000
Date of revision:
Handle: RePEc:hhs:aareco:2000_005

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Paper
- Paldam, M. & Svendsen, G.T., 2000. "Missing Social Capital and the Transition in Eastern Europe," Papers 00-5, Aarhus School of Business - Department of Economics.

Find related papers by JEL classification:
A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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