Chapter

Lessons from Transition Economies

Vladimir Popov

in Development Success

Published in print November 2012 | ISBN: 9780199660704
Published online January 2013 | e-ISBN: 9780191748943 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199660704.003.0014

Series: WIDER Studies in Development Economics

Lessons from Transition Economies

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This chapter considers why certain transition economies successfully pursued policies other than the radical economic liberalization (shock therapy) normally credited for the economic success of CEEs. First, optimal policies are context-dependent: they are specific to each stage of development and what worked in Slovenia cannot be expected to work in Mongolia. Second, even for countries at the same level of development, reforms needed to stimulate growth are different: they depend on history and on the path chosen. The reduction of government expenditure as a share of GDP did not significantly undermine the institutional capacity of the state in China; in Russia and other CIS states, it was ruinous. Growth diagnostics should reveal the missing ingredient for economic growth. Most importantly, adding this ‘missing ingredient’ should not destroy other preconditions for growth: the art of the policymaker is to create markets without causing government failure, as happened in many CIS countries.

Keywords: transition; transition economies; growth diagnostics; path dependence

Chapter.  6395 words.  Illustrated.

Subjects: Economic Development and Growth

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