Liberalization and the Behavior of Output During the Transition From Plan to Market
April 1, 1997
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Summary
This paper deals with liberalization and the evolution of output during the transition from plan to market. It explains why strong liberalization leads to a comparatively steep fall in output early in the transition, but a relatively strong recovery later on. Because it takes time to restructure the capital stock inherited from the old system, liberalization initially leads to transitional unemployment of capital and the contraction of the old enterprise sector. By making room quickly for the new, more efficient enterprises, however, liberalization also sets the stage for recovery and a much higher level of income in the medium term.
Subject: Consumption, Inflation, National accounts, Prices, Production, Production growth
Keywords: Baltics, Central and Eastern Europe, Consumption, Inflation, Liberalization, liberalization effort, liberalization index, liberalization process, liberalization variable, Output, Production growth, real GDP, Transition, type-B firm, WP
Pages:
29
Volume:
1997
DOI:
Issue:
053
Series:
Working Paper No. 1997/053
Stock No:
WPIEA0531997
ISBN:
9781451969979
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 44, No. 4, December 1997.
