DP575 Sequencing the Transition

Author(s): David M G Newbery
Publication Date: August 1991
Keyword(s): Competition Policy, Eastern Europe, Sequencing, Tax Reform
JEL(s): L41, P23, P52
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=575

The inefficiency of Soviet-type economies results from their monopolized production structure, which makes soft budget constraints almost inevitable, as enterprises have bargaining power and must face expropriative tax rates for macroeconomic stability. Systemic reform aims to improve incentives, and if this is to be achieved with macro-stability, enterprises must be demonopolized. Most sequencing issues resolve into three key concerns: ensuring or restoring macroeconomic stability; not ruling out options for subsequent reforms, specifically those intended to increase competition; and maintaining support for completing the reform process.