Welfare against growth gains in post-transition countries: What are the consequences for stability?
This paper discusses the underpinnings of the financial crisis of the last decade. It explores the endogenous reasons of this crisis, and in particular a possible link between delayed and unequal growth of household incomes in post-transition countries on one hand and the instability of their growth and depth of recession after the financial crisis on the other. It indicates possible microeconomic factors under-pinning rapidly growing indebtedness of households, enabling faster consumption growth, but subject to fluctuations. It claims also that artificially boosted growth of consumption and a favourable proportion between wages and profits could attract investment (also FDI), possibly searching for short-term gains. It underlines that the inflow of financial funds contributed to, but did not cause instability growth in this region.
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