Output performance, institutions and structural policy reforms for transition economies
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.
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