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Back to the Future: The Growth Prospects of Transition Economies Reconsidered

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  • Nauro F. Campos

Abstract

There are two strands in the empirical literature on economic growth in transition economies. One focuses on the impact of reforms, while the other emphasizes sustainability issues and the growth prospects these economies face. The most common strategy, in the latter, has been to use coefficients from growth regressions, on large samples of developing countries, and impose them on transition economies’ data to obtain projected growth rates. We refer to it as the BLR approach (because it uses specifications from Barro, and Levine and Renelt). We claim that the reported growth rates are suspiciously similar, painting an overly optimistic picture and yielding few policy lessons. We re-estimate the BLR equations for data on transition economies themselves and find that government expenditures have been positively associated and human capital has been negatively associated with output growth. These results contrast sharply with the assumptions and findings from the BLR approach, questioning its might and challenging our understanding of the transition process in its key dimension.

Suggested Citation

  • Nauro F. Campos, 1999. "Back to the Future: The Growth Prospects of Transition Economies Reconsidered," CERGE-EI Working Papers wp146, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp146
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    Cited by:

    1. Ofer, Gur, 2002. "The Meltdown of the Russian State: Piroska Mohacsi Nagy, Edward Elgar publishers, Cheltenham, UK and Northampton, MA, USA, 2000," European Journal of Political Economy, Elsevier, vol. 18(3), pages 611-613, September.
    2. Barrell, Ray & Dawn Holland & Nigel Pain, 2002. "An Econometric Macro-model of Transition: Policy Choices in the Pre-Accession Period," Royal Economic Society Annual Conference 2002 15, Royal Economic Society.
    3. Fidrmuc, Jan, 2003. "Economic reform, democracy and growth during post-communist transition," European Journal of Political Economy, Elsevier, vol. 19(3), pages 583-604, September.
    4. Popov, Vladimir, 2001. "Reform Strategies and Economic Performance of Russia's Regions," World Development, Elsevier, vol. 29(5), pages 865-886, May.
    5. Tito Boeri, 1999. "Transition with Labour Supply," William Davidson Institute Working Papers Series 274, William Davidson Institute at the University of Michigan.
    6. Martin Wagner & Jaroslava Hlouskova, 2005. "CEEC growth projections: Certainly necessary and necessarily uncertain," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 341-372, April.
    7. J. Fidrmuc & J. Fidrmuc, 2000. "Macroeconomic Developments in the Czech Republic and the EU Accession Process," Working Papers ir00008, International Institute for Applied Systems Analysis.
    8. Polterovich, Victor & Popov, Vladimir, 2005. "Democracy and Growth Reconsidered: Why Economic Performance of New Democracies is not Encouraging," MPRA Paper 21606, University Library of Munich, Germany.
    9. Polterovich, Victor & Popov, Vladimir, 2007. "Демократизация И Экономический Рост
      [Democratization and Economic Growth]
      ," MPRA Paper 23012, University Library of Munich, Germany.
    10. J. Fidrmuc & J. Fidrmuc, 2000. "Macroeconomic Developments in Slovakia and the EU Accession Process," Working Papers ir00007, International Institute for Applied Systems Analysis.
    11. J. Gacs, 2000. "Macroeconomic Developments in Hungary and the Accession Process," Working Papers ir00013, International Institute for Applied Systems Analysis.
    12. Fidrmuc, Jan, 2001. "Democracy in transition economies: Grease or sand in the wheels of growth?," ZEI Working Papers B 09-2001, University of Bonn, ZEI - Center for European Integration Studies.
    13. Rumen Dobrinsky, 2003. "Convergence in Per Capita Income Levels, Productivity Dynamics and Real Exchange Rates in the EU Acceding Countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 305-334, September.
    14. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
    15. Fidrmuc, Jan, 2000. "Liberalization, democracy and economic performance during transition," ZEI Working Papers B 05-2000, University of Bonn, ZEI - Center for European Integration Studies.
    16. Campos, Nauro F., 2000. "Context is everything : measuring institutional change in transition economies," Policy Research Working Paper Series 2269, The World Bank.
    17. Crafts, Nicholas & Kaiser, Kai, 2004. "Long-term growth prospects in transition economies: a reappraisal," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 101-118, March.

    More about this item

    Keywords

    Transition economies; economic growth; growth prospects.;

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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