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The determinants of economic growth of transition economies: Economic reform versus initial conditions

  • Young-Sun Lee
  • Hyung-Gon Jeong
Registered author(s):

    This study analyzes factors for economic recovery of transition economies in Europe and the Commonwealth of Independent States for the period of the 1990s. Covariance structure analysis is employed to estimate the structural equation system, and exploratory factor analysis is conducted to measure initial conditions and economic policy as latent variables. The result of analysis shows that the effect of initial conditions is negative and the impact of economic reform on growth is positive. However, the negative effect of initial conditions had overridden the positive impact of economic policy as of 2000. The reason that transition economies could not recover their pre-transition GDP level (even after ten years of transition history) seems to stem from the negative influence of initial conditions on growth rather than the slow speed of economic reform.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730600699572
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    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 20 (2006)
    Issue (Month): 2 ()
    Pages: 241-252

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    Handle: RePEc:taf:intecj:v:20:y:2006:i:2:p:241-252
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    1. de Melo, Martha & Denizer, Cevdet & Gelb, Alan & Tenev, Stoyan, 1997. "Circumstance and choice : the role of initial conditions and policies in transition economies," Policy Research Working Paper Series 1866, The World Bank.
    2. Sašo Polanec, 2004. "Convergence at Last? : Evidence from Transition Countries," Eastern European Economics, M.E. Sharpe, Inc., vol. 42(4), pages 55-80, July.
    3. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    4. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    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. World Bank, 2002. "World Development Indicators 2002," World Bank Publications, The World Bank, number 13921.
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