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Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition

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  • Katrin Elborgh-Woytek
  • Julian Berengaut
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    Abstract

    The paper analyzes the initial output decline in transition economies by estimating a crosssection model stressing two major factors-conflicts and the legacies of the Soviet period. We link the Soviet legacies in place at the outset of the transition to the subsequent path for the development of market-related institutions. Institutional development (as proxied by measures of corruption) is used as an intermediate variable. An instrumental variable approach is followed to derive estimates that are not biased by the possible endogeneity of corruption with respect to output developments. Assuming that the extent of Soviet legacies was positively correlated with the length of the communist rule allows us to use the years under the Soviet regime as an instrument.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/68.

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    Length: 22
    Date of creation: 01 Apr 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/68

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    Related research

    Keywords: Production; Former Soviet Union; Transition economies; Economic models; instrumental variable; transition countries; statistic; surveys; equation; standard errors; probability; covariance; parsimonious model; correlation; world economy; world market; output growth; statistics; national borders; dummy variable; instrumental variables; domestic prices; transition period; global competitiveness; black market premia;

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    References

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    1. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos, 1996. "Stabilization and growth in transition economies: The early experience," MPRA Paper 20631, University Library of Munich, Germany.
    2. International Monetary Fund, 2000. "Growth Experience in Transition Countries, 1990-1998," IMF Occasional Papers 184, International Monetary Fund.
    3. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    4. International Monetary Fund, 2000. "The Great Contractions in Russia, the Baltics and the Other Countries of the Former Soviet Union," IMF Working Papers 00/32, International Monetary Fund.
    5. Simeon Djankov & Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2003. "The New Comparative Economics," NBER Working Papers 9608, National Bureau of Economic Research, Inc.
    6. Aleksei Makushkin, 1993. "From Conversion to Deindustrialization?," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 35(9), pages 34-45, January.
    7. Elisabetta Falcetti & Martin Raiser & Peter Sanfey, 2000. "Defying the odds: initial conditions, reforms and growth in the first decade of transition," Working Papers 55, European Bank for Reconstruction and Development, Office of the Chief Economist.
    8. Aslund,Anders, 2002. "Building Capitalism," Cambridge Books, Cambridge University Press, number 9780521805254, October.
    9. Stanley Fischer & Carlos A. Végh Gramont & Ratna Sahay, 1996. "Stabilization and Growth in Transition Economies," IMF Working Papers 96/31, International Monetary Fund.
    10. Oleh Havrylyshyn & Ron van Rooden, 2003. "Institutions Matter in Transition, But So Do Policies," Comparative Economic Studies, Palgrave Macmillan, vol. 45(1), pages 2-24, March.
    11. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
    12. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    13. Andrzej Rapaczynski, 1996. "The Roles of the State and the Market in Establishing Property Rights," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 87-103, Spring.
    14. Ratna Sahay & Jeromin Zettelmeyer & Eduardo Borensztein & Andrew Berg, 1999. "The Evolution of Output in Transition Economies," IMF Working Papers 99/73, International Monetary Fund.
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    Cited by:
    1. Andrew Tiffin, 2006. "Ukraine," IMF Working Papers 06/167, International Monetary Fund.
    2. Edward R. Gemayel & David A. Grigorian, 2006. "How Tight is Too Tight? A Look at Welfare Implications of Distortionary Policies in Uzbekistan," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 3(2), pages 239-261, December.

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