The determinants of economic growth of transition economies: Economic reform versus initial conditions

Authors: Lee, Young-Sun¹; Jeong, Hyung-Gon²

Source: International Economic Journal, Volume 20, Number 2, June 2006 , pp. 241-252(12)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This study analyzes factors for economic recovery of transition economies in Europe and the Commonwealth of Independent States for the period of the 1990s. Covariance structure analysis is employed to estimate the structural equation system, and exploratory factor analysis is conducted to measure initial conditions and economic policy as latent variables. The result of analysis shows that the effect of initial conditions is negative and the impact of economic reform on growth is positive. However, the negative effect of initial conditions had overridden the positive impact of economic policy as of 2000. The reason that transition economies could not recover their pre-transition GDP level (even after ten years of transition history) seems to stem from the negative influence of initial conditions on growth rather than the slow speed of economic reform.

Keywords: Transition economy; growth; economic reform; covariance analysis; initial conditions

Document Type: Research article

DOI: http://dx.doi.org/10.1080/10168730600699572

Affiliations: 1: Yonsei University, Suhdaemoon-ku, Seoul, Korea 2: Korea Institute for International Economic Policy, Seocho-ku, Seoul, Korea

Publication date: 2006-06-01