Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition
IMF Working Papers, April 1, 2005
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Bibliographic details
- Authors: Katrin Elborgh-Woytek, Julian Berengaut
- Published: April 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451860870.001
Overview and Research Question
- Paper title: Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition
- Authors: Katrin Elborgh-Woytek, Julian Berengaut
- Publication date: April 1, 2005
- Publication series: Working Paper No. 2005/068
- Issue: 068
- Volume: 2005
- Pages: 22
- DOI: https://doi.org/10.5089/9781451860870.001
- Stock No: WPIEA2005068
- ISBN: 9781451860870
- ISSN: 1018-5941
- Subject areas and keywords: Corruption, Crime, Econometric analysis, Estimation techniques, Integrated Policy Framework, Personal income tax, Taxes; 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
Main Hypotheses and Conceptual Framework
- Central hypothesis: Initial output decline in transition economies is driven primarily by two major factors — conflicts and the legacies of the Soviet period.
- Mechanism emphasized: Soviet legacies existing at the outset of transition influence the subsequent path for the development of market-related institutions.
- Institutional development role: Institutional development is used as an intermediate variable in the analysis, proxied by measures of corruption.
Methodology
- Empirical approach: Cross-section model estimated to analyze initial output decline across transition economies.
- Instrumental variable strategy:
- Rationale: To obtain estimates not biased by the possible endogeneity of corruption with respect to output developments.
- Instrument: Years under the Soviet regime are used as an instrument, based on the assumption that the extent of Soviet legacies was positively correlated with the length of communist rule.
Key Findings (as described)
- Two major drivers identified for initial output contractions:
- Conflicts.
- Legacies of the Soviet period as they affect institutional development.
- Institutional development (proxied by corruption measures) functions as an intermediate channel linking Soviet legacies to output outcomes.
- Use of an instrumental variable (years under the Soviet regime) is central to addressing endogeneity concerns in estimating the effect of corruption on output developments.
Implications and Policy-relevant Points (as presented)
- Institutional quality matters for the recovery path of transition economies; corruption measures capture aspects of institutional development relevant for output contractions.
- Understanding historical legacies (length of communist rule) is important for interpreting cross-country variation in initial output declines during transition.
- Addressing conflict and improving market-related institutions could be focal areas for mitigating output contractions in transition settings.
Source: IMF Working Paper — Katrin Elborgh-Woytek and Julian Berengaut, "Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition", April 1, 2005, Working Paper No. 2005/068.