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Investment, Growth and Industrial Renewal in the Transition Economies

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  • P.G. Hare

Abstract

Following the initial shocks associated with the collapse of communism, and the probolems of implementing a broad range of market-oriented reforms, achieving sustained growth requires an economic environment favouring high rates of savings and investment, encouraging for foreign investors, and conducive to profitable, highly productive investment. This is especially hard in the transition economies since they embarked on the transition with institutional systems, production structures and technologies that were adapted to the requirements and circumstances of central planning. At sectoral and enterprise levels, the legacy of the planned economy is an economic situation immensely more difficult than that which is perfectly normal in any market-type economy undergoing the more or less routine and regular processes of adjustment and structural change along a growth path. This paper explains why the two levels just mentioned are so problematic in transition economies, and then discusses the relations between savings rates, investment and growth in a more general way. This prepares the ground for a detailed analysis of growth in the transition economies. The paper concludes by drawing attention to some remaining questions that must be examined further in future work. In particular, what are the factors that are already leading the performance of even the most advanced countries in transition to diverge so markedly? And how can savings rates be raised?

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Bibliographic Info

Paper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 9701.

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Date of creation: 1997
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Handle: RePEc:hwe:certdp:9701

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  1. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  2. Xavier Sala-i-Martin, 1995. "The classical approach to convergence analysis," Economics Working Papers 117, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Jeffrey Sachs & Andrew M. Warner, 1996. "Achieving Rapid Growth in the Transition Economies of Central Europe," CASE Network Studies and Analyses 0073, CASE-Center for Social and Economic Research.
  4. János Kornai & Collegium BudapÈst, 1995. "Eliminating the shortage economy: a general analysis and examination of the dÈvelopments in Hungary: Part," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(2), pages 149-168, 06.
  5. Anders Åslund & Peter Boone & Simon Johnson, 1996. "How to Stabilize: Lessons from Post -communist Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 217-314.
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Cited by:
  1. Peter Luzik, 1999. "International Experience in Tax Reform and Lessons for Ukraine," CERT Discussion Papers 9904, Centre for Economic Reform and Transformation, Heriot Watt University.
  2. Yasushi Nakamura, 1998. "Investment and Saving in Russian Macroeconomy. Compilation and Analyses of an aggregated SAM for Russia, 1995," CERT Discussion Papers 9809, Centre for Economic Reform and Transformation, Heriot Watt University.

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