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Driving Forces Of Economic Growth In The Second Decade Of Transition

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  • Radmila Dragutinović Mitrović
  • Olgica Ivančev

Abstract

This paper examines driving forces of economic growth in the second transition decade, by testing which determinants from the first decade remain dominant, and which new factors appear in explaining growth. To this end a panel simultaneous equation model is estimated based on a sample of 27 transition countries in the period 1999-2009. According to the main findings of the paper initial conditions do not play a role in determining economic growth in the second decade, but macroeconomic stabilisation and structural reforms still matter. However, in contrast to the first decade, the overall impact of structural reforms is not positive, indicating that difficult progress with reforms in the second decade could slow down economic growth. Moreover, EU membership seems to have the additional effect of slowing down the growth of the accessing countries, meaning that once a transition country becomes an EU member it has a similar growth path to other EU countries in terms of lower growth rates. All this indicates that only countries that undertook fast reforms in the early phase of transition experienced significant benefits from reforms, achieving higher levels of economic development and becoming closer to developed EU countries. Finally, investments and openness of the economy appear as new important determinants of growth.

Suggested Citation

  • Radmila Dragutinović Mitrović & Olgica Ivančev, 2010. "Driving Forces Of Economic Growth In The Second Decade Of Transition," Economic Annals, Faculty of Economics, University of Belgrade, vol. 55(185), pages 7-32, April - J.
  • Handle: RePEc:beo:journl:v:55:y:2010:i:185:p:7-32
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    File URL: http://ea.ekof.bg.ac.rs/pdf/185/a/1.1.pdf
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    References listed on IDEAS

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    1. Falcetti, Elisabetta & Lysenko, Tatiana & Sanfey, Peter, 2006. "Reforms and growth in transition: Re-examining the evidence," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 421-445, September.
    2. Henrekson, Magnus & Torstensson, Johan & Torstensson, Rasha, 1997. "Growth effects of European integration," European Economic Review, Elsevier, vol. 41(8), pages 1537-1557, August.
    3. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    4. Oleh Havrylyshyn & Ron van Rooden, 2003. "Institutions Matter in Transition, But So Do Policies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 45(1), pages 2-24, March.
    5. Falcetti, Elisabetta & Raiser, Martin & Sanfey, Peter, 2002. "Defying the Odds: Initial Conditions, Reforms, and Growth in the First Decade of Transition," Journal of Comparative Economics, Elsevier, vol. 30(2), pages 229-250, June.
    6. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos, 1998. "From transition to market: Evidence and growth prospects," MPRA Paper 20615, University Library of Munich, Germany.
    7. Patrick Vanhoudt, 1999. "Did the European unification induce economic growth? In search of scale effects and persistent changes," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(2), pages 193-220, June.
    8. Karsten Staehr, 2005. "Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 177-202, December.
    9. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
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    11. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
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    Cited by:

    1. Kosta Josifidis & Radmila Dragutinović Mitrović & Olgica Ivančev, 2012. "Heterogeneity of Growth in the West Balkans and Emerging Europe: A Dynamic Panel Data Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(2), pages 157-183, May.
    2. Bozidar Cerovic & Aleksandra Nojkovic & Milica Uvalic, 2014. "Growth And Industrial Policy During Transition," Economic Annals, Faculty of Economics, University of Belgrade, vol. 59(201), pages 7-34, April – J.

    More about this item

    Keywords

    economic growth; transition economies; panel data model; EU enlargement process;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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