Patterns and Determinants of Economic Reform in Transition Economies: 1990-1998
The paper begins by presenting a framework for evaluating transition. The framework identifies categories of influences or "determinants of transition" and how they interact to produce short-term impacts, intermediate outcomes, and long-term socio-economic performance. Among the determinants are the so-called "initial conditions" of transition. The initial conditions describe the situation a country finds itself at the start of the process and are a mixture of geographic fixed characteristics, hard-to-change institutional and economic conditions, and relatively easy-to-change policy conditions. The paper then uses the initial conditions to create a country cluster typology, which is used throughout the rest of the paper. Focusing on the "cluster" as the central unit of analysis underscores our belief that this method greatly simplifies the analysis while at the same time illuminating common features that would otherwise be obscured by country-specific details. This approach also recognizes that the inter-cluster differences are so profound as to make it senseless to compare, say capital market developments in Poland with the Kyrgyz Republic; their initial conditions are just too different. While it is difficult to draw lessons between countries in different clusters, the opposite is true within clusters. By specifically controlling for common initial conditions among countries within a cluster we find ourselves with a powerful assessment tool to evaluate the effectiveness of the alternative policies that countries have taken within the cluster. In brief, a cluster based analysis is a more productive approach upon which to formulate donor programs.
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More About This Work
Systemic Transformation in Transition Economies, Volume I.