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Is There a J-Curve for the Economic Transition from Socialism to Capitalism?

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  • Brada, Josef C
  • King, Arthur E

Abstract

It is often assumed that the process of transition from socialism to capitalism involves a dislocation and disorganization of the economy in the early stages of the transition. Thus, it is argued, economic performance will at first worsen and then gradually improve as the new system takes hold. This paper argues that, based on evidence from Czechoslovakia, Hungary, and Poland, there is no evidence for such a J-curve phenomenon. Using a simple macroeconomic model, the authors show that, in these three reforming countries, the decline in production can be explained by exogenous shocks to the balance of trade, to investments and to autonomous consumption. This finding also suggests that macroeconomic policy in these countries may be too restrictive to permit a recovery of employment and production. Copyright 1992 by Kluwer Academic Publishers

Suggested Citation

  • Brada, Josef C & King, Arthur E, 1992. "Is There a J-Curve for the Economic Transition from Socialism to Capitalism?," Economic Change and Restructuring, Springer, vol. 25(1), pages 37-53.
  • Handle: RePEc:kap:ecopln:v:25:y:1992:i:1:p:37-53
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    Cited by:

    1. Gabrisch, Hubert, 2014. "The binding constraint on growth in less developed Western Balkan countries," MPRA Paper 60020, University Library of Munich, Germany.
    2. Mihályi, Péter, 2000. "Privatizáció és globalizáció avagy az Anti-equlibrium újrafelfedezése
      [Privatization and globalization or the rediscovery of Anti-Equilibrium]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 859-877.
    3. Roberts, Barbara M. & Zolkiewski, Zbigniew, 1996. "Modelling income distribution in countries in transition: A computable general equilibrium analysis for Poland," Economic Modelling, Elsevier, vol. 13(1), pages 67-90, January.
    4. Girard, Dorota Zdanowska, 2005. "The cost of epidemiological transition: A study of a decrease in pertussis vaccination coverage," Health Policy, Elsevier, vol. 74(3), pages 287-303, November.
    5. Kitov, Ivan, 2009. "From socialism to capitalism: 1989-2007," MPRA Paper 14914, University Library of Munich, Germany.
    6. El-hadj Bah & Josef C. Brada, 2014. "Labor Markets in the Transition Economies: An Overview," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 11(1), pages 3-53, June.
    7. Wolfgang Quaisser & John Hall, 2002. "Toward Agenda 2007 : Preparing the EU for Eastern Enlargement," Working Papers 240, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    8. Raiser, Martin, 1994. "Lessons for whom, from whom? The transition from socialism in China and Central Eastern Europe compared," Kiel Working Papers 630, Kiel Institute for the World Economy (IfW).
    9. Ivan O. KITOV, 2009. "Modelling The Evolution Of Real Gdp Per Capita During The Transition From A Socialist To Capitalist Economic System," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(4(10)_Win), pages 526-548.
    10. Funke, Norbert, 1993. "Timing and sequencing of reforms: Competing views," Kiel Working Papers 552, Kiel Institute for the World Economy (IfW).
    11. Raiser, Martin & Nunnenkamp, Peter, 1993. "Output decline and recovery in Central Europe: the role of incentives before, during and after privatisation," Kiel Working Papers 601, Kiel Institute for the World Economy (IfW).
    12. ter Horst, H.A.F., 1996. "Socialism, Capitalism, and Transition with Special Reference to Poland," Other publications TiSEM 58e2e881-80c1-45a0-8ce8-7, Tilburg University, School of Economics and Management.
    13. Dan Lupu & Mircea Asandului, 2014. "Exchange Rate and Trade: J-curve in European Union," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, pages 136-145.
    14. Michael Landesmann & Hermine Vidovic, 2006. "Employment Developments in Central and Eastern Europe," wiiw Research Reports 332, The Vienna Institute for International Economic Studies, wiiw.
    15. Bouev Maxim & Matveenko Vladimir & Vostroknutova Ekaterina, 1998. "Transformational Decline and Preconditions of Growth in Russia," EERC Working Paper Series 98-03e, EERC Research Network, Russia and CIS.
    16. Raiser, Martin, 1992. "Soft budget constraints: An institutional interpretation of stylised facts in economic transformation in Central Eastern Europe," Kiel Working Papers 549, Kiel Institute for the World Economy (IfW).

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