Output performance, institutions and structural policy reforms for transition economies

by Angjellari-Dajci, Fjorentina

Abstract (Summary)
This dissertation explores the relationships between three groups of variables in the

transition economies of Central and Eastern Europe (CEE) and Commonwealth of Independent

States (CIS), from 1989 to 2003. The first group consists of output level and output growth as

measured by gross domestic product index (GDPI) and gross domestic product growth (GDPG).

The second group consists of two categories of institutional development (INST), and the third

group of variables is structural policy reforms (SPR), often known as liberalization policies.

This dissertation’s theoretical and empirical framework explicitly account for the

endogeneity between output performance variables, the measures of institutional development

and SPR. Several empirical specification models of the theoretical simultaneous system of three

equations are estimated. In the first group of specification models the dependent endogenous

variables are GDPG, SPR and INST, while in the second group the dependant endogenous

variables are GDPI, SPR and INST. Moreover, two datasets are used. The first dataset has data

from 1989 to 2003, thus covering the whole transition period, while the second dataset is a subset

of the first one, containing data for the recovery stage of transition only.

The empirical methods used in this dissertation include panel data analysis, principal

component analysis, two stages least squares approach and three stage least squares approach in

the presence of a SUR modeling procedure.

With respect to the output performance equation, the findings of this research indicate

that institutional reform (INSTREF), and property rights and contract enforcement institutions

(PCINST and ROLINST) are very important determinants of output levels when the whole

transition period dataset is used, and very important determinants of both the output levels and

output growth rates when the recovery stage dataset is used. While the effect of current SPR is

ambiguous, the effect of lagged SPR on output and output growth is positive. Moreover, SPR

continue to affect output performance via their indirect effect on institutional development.

With respect to the institutional reforms, and property rights and contract enforcement

institutions, two sets of determinants were found to be important. On the side of the demand

factors, SPR, and especially lagged SPR is found to be an important determinant of both

institutional reforms and property rights and contract enforcement institutions. On the side of

supply factors, macroeconomic stabilization, a measure of the state’s capacity to implement institutional reform, resulted very important in explaining the variation in institutional reform

and property rights and contract enforcement institutions. Political reform, in terms of a shift

from the autarkic political regime to a democratic political regime, is found to positively affect

institutional development in the recovery stage.

With respect to the structural policy reforms’ equations, this dissertation’s main finding is

that political reform positively affects SPR in both datasets. Moreover, lagged SPR is found to

positively affect SPR, which is an indication of transition governments’ maintained commitment

to a package of SPR-s.

Bibliographical Information:


School:Kansas State University

School Location:USA - Kansas

Source Type:Master's Thesis

Keywords:economic growth transition institutions political reform initial conditions economics general 0501


Date of Publication:01/01/2005

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