Soviet power plus electrification: what is the long-run legacy of communism?
AbstractTwo decades after the end of central planning, we investigate the extent to which the advantages bequeathed by planning in terms of high investment in physical infrastructure and human capital compensated for the costs in allocative inefficiency and weak incentives for innovation. We assemble and analyse three separate types of evidence. First, we find that countries that were initially relatively poor prior to planning benefited more, as measured by long-run GDP per capita levels, from infrastructure and human capital than they suffered from weak market incentives. For initially relatively rich countries the opposite is true. Second, using various measures of physical stocks of infrastructure and human capital we show that at the end of planning, transition countries had substantially different endowments from their contemporaneous non-transition counterparts. However, these differences were much more important for poor than for rich countries. Finally, we use firm-level data to measure the cost of a wide range of constraints on firm performance, and we show that after more than a decade of transition in 2002–05, poor transition economies differ much more from their non-transition counterparts, in respect to both good and bad aspects of the planning legacy, than do relatively rich transition countries. However, the persistent beneficial legacy effects disappeared under the pressure of strong growth in transition economies in the run-up to the global financial crisis.
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Bibliographic InfoPaper provided by Macerata University, Department of Studies on Economic Development (DiSSE) in its series Working Papers with number 43-2012.
Date of creation: Jun 2012
Date of revision: Jun 2012
business environment; transition; institutions; infrastructure; planned economy;
Other versions of this item:
- Carlin, Wendy & Schaffer, Mark & Seabright, Paul, 2013. "Soviet power plus electrification: What is the long-run legacy of communism?," Explorations in Economic History, Elsevier, vol. 50(1), pages 116-147.
- Carlin, Wendy & Schaffer, Mark E & Seabright, Paul, 2012. "Soviet power plus electrification: what is the long-run legacy of communism?," CEPR Discussion Papers 9003, C.E.P.R. Discussion Papers.
- Carlin, Wendy & Schaffer, Mark & Seabright, Paul, 2012. "Soviet power plus electrification: What is the long-run legacy of communism?," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-PKE-2012-09-30 (Post Keynesian Economics)
- NEP-TRA-2012-09-30 (Transition Economics)
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