On the Speed of Transition Central Europe
AbstractTransition in Central Europe is four years old. State firms which dominated the economy are struggling with market forces. A new private sector quickly emerged and has taken hold. Unemployment, which did not exist, is high and still increasing. Will this process of transition accelerate, or slow down? Will unemployment keep increasing? Can things go wrong and how? Our paper represents a first pass at answering those questions. The basic structure of the model we develop is standard, that of the transition from a low to a high productivity sector. But we pay attention to two aspects which strike us as important. The first is the interactions between unemployment and the decisions of both state and private firms. The second are the idiosyncracies which come from the central planning legacy, from the structure of control within state firms to the lack of many market institutions, which limits private sector growth. We start with a description of transition in Poland so far. We then develop a model and use it to think about the determinants of the speed of transition and the level of unemployment. Finally, we return to the role of policy and the future in Poland, as well as the causes of cross-Central European country variations.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4736.
Date of creation: May 1994
Date of revision:
Publication status: published as Philippe Aghion, Olivier J. Blanchard. "On the Speed of Transition in Central Europe," in Stanley Fischer and Julio J. Rotemberg, eds., "NBER Macroeconomics Annual 1994, Volume 9" MIT Press (1994)
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Find related papers by JEL classification:
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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