Economists have used cross-national regression analysis to argue that postcommunist economic failure is the result of inadequate adherence liberal economic policies. Sociologists have relied on case study data to show that postcommunist economic failure is the outcome of too close adherence to liberal policy recommendations, which has led to an erosion of state effectiveness, and thus produced poor economic performance. The present paper advances a version of this statist theory based on a quantitative analysis of mass privatization programs in the postcommunist world. We argue that rapid large-scale privatization creates severe supply and demand shocks for enterprises, thereby inducing firm failure. The resulting erosion of tax revenues leads to a fiscal crisis for the state, and severely weakens its capacity and bureaucratic character. This, in turn, reacts back on the enterprise sector, as the state can no longer support the institutions necessary for the effective functioning of a modern economy, thus resulting in deindustrialization. Using cross-national regression techniques we find that the implementation of mass privatization programs negatively impacts measures of economic growth, state capacity and the security of property rights.
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Length: pages Date of creation: 01 Dec 2005 Date of revision: Handle: RePEc:wdi:papers:2005-806
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Find related papers by JEL classification: B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
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