Abstract
The discussion in the previous chapters has made clear that the transition from central planning to a market economy is a complex process, which involves a broad range of different, though interdependent issues. The experience with the transition process in Central and Eastern Europe so far has, however, also revealed that structural reforms are presumably the most difficult and time-consuming element of transition. The delay of structural adjustments may be considered the most serious obstacle to economic recovery and to the realisation of growth in transition economies.
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References
For a more comprehensive discussion of factor re-allocation in the presence of adjustment costs see, e.g., Meckl 1994.
For a survey on efficiency wage models with regard to Western market economies see for instance Akerlof and Yellen 1986.
The importance of expectations and attitudes for reform processes have been emphasised for instance by Kolarska-Bobinska 1988, 1991 or by Lapidus 1983 and Saslawskaja 1988.
For the use and interpretation of shadow prices cf. Drèze and Stern (1987).
The framework for analysing labour re-allocation and economic restructuring in a transition economy employed here resembles the one-sector models in Wyplosz (1993), Aghion and Blanchard (1994) and Aghion et al. (1994), while the idea of one special sector facilitating adjustment follows Mussa (1978, 1982).
This is an important difference to the model by Mussa (1978, 1982). There, a market for the “service” of restructuring exists and the restructuring service is provided by profit-maximising firms. In effect, all costs of restructuring are internalised and private decisions lead to an efficient outcome. In the present model, it is assumed that no market exists for the restructuring service and that restructuring is not facilitated by separate, profit maximising firms, but occurs within the restructuring firms. In this case, incentives for restructuring exist beyond a point where the profit from restructuring is maximised.
It should be noted that trade policy may not be the “best” policy instrument for controlling the level of restructuring. The negative impact on consumers could potentially be avoided if a more direct instrument like a production subsidy were available. Some arguments why trade policy may nevertheless be the preferred policy instrument are summarised in Rodrik (1995). For the case of transition economies, there is an additional argument. Given the history of central planning and very direct interference into economic decisions, less direct measures like trade policy may be preferred exactly because they constitute a less direct form of intervention into private economic decisions.
For an overview over trade policies during transition cf. Kaminski et al. (1996), Gács (1994) or Rosati (1993b).
One of the rare attempts to explain trade liberalisation from a political economy perspective is Hillman and Moser (1995).
The political conditions during early stages of transition in Central European transition countries are succinctly described in Batt (1991). For an application of this concept of extraordinary politics see also Hillman and Ursprung (1996).
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© 2000 Betriebswirtschaflicher Verlag Dr. Th. Gabler GmbH, Wiesbaden, und Deutscher Universitäts-Verlag GmbH, Wiesbaden
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Wunner, N. (2000). Economic restructuring and labour re-allocation. In: The Political Economy of Transition. Gabler Edition Wissenschaft. Deutscher Universitätsverlag, Wiesbaden. https://doi.org/10.1007/978-3-322-89642-1_5
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DOI: https://doi.org/10.1007/978-3-322-89642-1_5
Publisher Name: Deutscher Universitätsverlag, Wiesbaden
Print ISBN: 978-3-8244-7242-0
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