IDEAS home Printed from
   My bibliography  Save this paper

Models of Transition in Eastern Europe with Untransferable Eastern Capital


  • Leamer, Edward E.

    (University of California, Los Angeles)


Economic liberalization in Eastern Europe allows access to a superior foreign technology. The initial adoption of the new technology is limited by the adaptability of current Eastern productive inputs to Western technologies. Further adoption is limited by the rate of Eastern investment in suitable inputs. Both the immediate amount and the continuing flow of adoption can be increased if capital is available from Western sources. Privatization that takes the form of a forced transfer of assets to the advanced sector is not necessarily desirable if all assets are not fully transferable. If the initial Eastern capital/labor ratio is high enough, it is desirable to allocate some of the new entrants in the labor force into the state-supported backward sector even as all new capital investment is placed in the advanced sector. Generally the East should concentrate its product mix on the capital-intensive products using the backward technology and the labor-intensive products using the advanced technology. If privatization is the only option, it is better to privatize the labor-intensive sector, or more accurately the sector that uses intensely those inputs that are most readily transferable to the advanced technology. Because of the preservation of the capital-intensive state-supported sector, the East may initially export the capital-intensive products made with the backward technology. Over time, with capital accumulation and depreciation, the product mix and the trade mix will shift in favor of the labor-intensive product made with the advanced technology.

Suggested Citation

  • Leamer, Edward E., 1994. "Models of Transition in Eastern Europe with Untransferable Eastern Capital," East European Series 12, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsrop:12

    Download full text from publisher

    File URL:
    File Function: First version, 1994
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ihs:ihsrop:12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Szoncsitz). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.