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Who Gains from Restructuring the Post-Soviet Transition Economies, and Why?

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  • T. Huw Edwards

Abstract

To explore the mixed economic results and huge distributional changes experienced by post-Soviet economies, I set up a series of theoretical and numerical simulation models using an approach based upon heterogeneous firms, where 'reform' means closure of inefficient capacity. In the presence of significant costs to new firm entry and international capital mobility, restructuring and privatisation can lead to falls in GDP and real wages, while capital is transferred abroad. This situation can occur even under perfect competition, but is worse when industrial production is concentrated and trade costs are high. By contrast, workers can gain when costs of establishing new firms are low, and/or when the inefficient industries are capital-intensive. For countries with high costs of firm set-up and of trade, capital controls may be justified to protect wages.

Suggested Citation

  • T. Huw Edwards, 2006. "Who Gains from Restructuring the Post-Soviet Transition Economies, and Why?," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(4), pages 425-448.
  • Handle: RePEc:taf:irapec:v:20:y:2006:i:4:p:425-448
    DOI: 10.1080/02692170600874010
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    References listed on IDEAS

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    1. Branko Milanovic, 1999. "Explaining the increase in inequality during transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 299-341, July.
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    Cited by:

    1. Serafini, Giovanni O. & Szamosi, Leslie T., 2015. "Five star hotels of a Multinational Enterprise in countries of the transitional periphery: A case study in human resources management," International Business Review, Elsevier, vol. 24(6), pages 972-983.

    More about this item

    Keywords

    Transition; wages; general equilibrium;

    JEL classification:

    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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