Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition

By Katrin Elborgh-Woytek, Julian Berengaut

April 1, 2005

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Katrin Elborgh-Woytek, and Julian Berengaut. Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition, (USA: International Monetary Fund, 2005) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper analyzes the initial output decline in transition economies by estimating a crosssection model stressing two major factors-conflicts and the legacies of the Soviet period. We link the Soviet legacies in place at the outset of the transition to the subsequent path for the development of market-related institutions. Institutional development (as proxied by measures of corruption) is used as an intermediate variable. An instrumental variable approach is followed to derive estimates that are not biased by the possible endogeneity of corruption with respect to output developments. Assuming that the extent of Soviet legacies was positively correlated with the length of the communist rule allows us to use the years under the Soviet regime as an instrument.

Subject: Corruption, Crime, Econometric analysis, Estimation techniques, Integrated Policy Framework, Personal income tax, Taxes

Keywords: Authority, Baltics, Central and Eastern Europe, CIS, CIS country, Commonwealth of Independent States, Corruption, Country authorities, Eastern Europe, Economy, Estimation techniques, Market failure, Output decline, Personal income tax, Transition economy, Visegrad country, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/068
Stock No:

WPIEA2005068
ISBN:

9781451860870
ISSN:

1018-5941

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