DP1372 Restructuring and Capital Accumulation in Transition Economies: A General Equilibrium Perspective
|Author(s):||Micael Castanheira, Gérard Roland|
|Publication Date:||April 1996|
|Keyword(s):||Eastern Europe, Investment, Restructuring, Speed of Transition, Transitional Dynamics|
|JEL(s):||E21, E61, P41, P51|
|Programme Areas:||Transition Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1372|
This paper adresses the issue of the optimal speed of economy-wide restructuring from a state-owned to a privately-owned economy. The analysis is led from a general equilibrium perspective, focusing on the role of endogenously generated capital accumulation. Sensitivity of the optimal speed of transition is performed with respect to preferences and technology. It is found in particular that adverse productivity shocks to the state sector, occurring early on in transition tend to create macroeconomic contraction and slow down investment and the speed of transition. Such shocks tend to accelerate transition if they occur at a later stage, however. This may shed light on the effect of adverse productivity shocks on output contraction in the early phase of transition in Central and Eastern Europe.