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The transition process from alternative theoretical prisms: A comparative analysis of Eastern European and former Soviet Block economies

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Purpose ‐ The paper aims to examine the reality of, and, conditions for economic growth for former Soviet and Soviet Block economies with special attention to Ukraine and the Russian Federation. Many of these economies' transition from "Communism" remain plagued by problems of institutional design and outcomes characterized by high levels of corruption and low levels of accountability and transparency. The purpose of this paper is to analyze aspects of these socio-economic realities in the context of contemporary economic theory and ongoing revisions to it. Design/methodology/approach ‐ The type of economic theory used to assess issues of transition has significant implications for public policy. Conventional economic theory has traditionally focused on secure private property rights, competitive markets, inclusive of "flexible" labor markets, as the necessary if not the sufficient conditions to successfully and quickly transition from command style to market economies. Little attention is paid to the details of institutional design. The paper applies a behavioral-institutional analytical framework to analyze important aspects of failures and successes in transition economies using both economic and governance data sets. Findings ‐ The paper finds that traditional measures of economic freedom are far from sufficient to generate economic growth. Accountability and transparency in governance structures is also required. Economic failure and success are closely connected with overall performance in socio-economic governance. Also an unnecessary emphasis on low wages, highly constrained social safety nets and labor market policy impedes successful growth and development. Practical implications ‐ Transition economies' economic performance can be significantly enhanced through improvements in institutional design that facilitates the evolution of high-wage market economies. The market in and of itself does not suffice to generate successful transitions from command to vibrant market economies. Originality/value ‐ This paper provides an original exposé and analysis of transition economies from a behavioral-institutionalist perspective, with important public policy implications.
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Keywords: Economic growth; Economic theory; Public policy; Russia; Ukraine

Document Type: Research Article

Publication date: June 5, 2009

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