DP3246 Growth in Transition: What we Know, What we Don't and What we Should

Author(s): Nauro F Campos, Fabrizio Coricelli
Publication Date: March 2002
Keyword(s): central and eastern europe, former soviet Union, growth, stylized facts, transition
JEL(s): O11, O40, P20, P23, P24, P30
Programme Areas: Transition Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3246

This essay surveys macroeconomic issues that marked the transition from centrally planned to market economy in Central and Eastern European and former Soviet Union countries. We first establish a set of stylized facts of the transition so far, namely: (1) output fell, (2) capital shrank, (3) labour moved, (4) trade reoriented, (5) the structure changed, (6) institutions collapsed, and (7) the transition costs. We then critically survey the theoretical literature on transition, discussing various explanations for the initial output fall as well as medium term issues, such as optimal speed of transition, disorganization, institutions and sectoral reallocation as a source of output dynamics. Last, we review the empirical literature to assess how well it translates the theoretical models and explains the stylized facts. The essay concludes with a succinct list of suggestions for future research.