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Defying the odds: initial conditions, reforms and growth in the first decade of transition

  • Elisabetta Falcetti


    (European Bank for Reconstruction and Development)

  • Martin Raiser

    (European Bank for Reconstruction and Development)

  • Peter Sanfey


    (European Bank for Reconstruction and Development)

This paper investigates the relative importance of three sets of factors – initial conditions, macroeconomic stabilisation and structural reforms – as determinants of growth in transition economies during the first 10 years. The paper has two main results. First, average growth over the last 10 years was substantially determined by initial conditions, both directly and indirectly through their impact on structural reforms. Second, controlling for different starting points, there is strong evidence that reforms pay off, while the effect of initial conditions tends to diminish over time. In addition, we find that stabilisation measures are important for growth but there is little evidence of a feedback effect from growth to reforms.

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Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 55.

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Length: 21 pages
Date of creation: Jun 2000
Date of revision:
Publication status: Published in E. Falcetti, M. Raiser and P. Sanfey (2002), Journal of Comparative Economics, 30(2), pp. 229-250.
Handle: RePEc:ebd:wpaper:55
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