class 6 - ECON 3808 The Economics of Transition Shock...

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1 ECON 3808 – The Economics of Transition Shock therapy vs. gradualism. Transformational recession Sources: Required readings and Prof. Vladimir Popov
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2 Outline Economic performance of transition economies Shock therapy and gradualism Theory of transformational recession; growth theory in transition economies Distortions in industrial structure and trade patterns Institutions, rule of law and democracy
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3
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4 GDP change in EE economies and Mongolia, 1989 = 100% Fig. 5. GDP change in East European transition economies and in Mongolia, 1989 = 100% 50 60 70 80 90 100 110 120 130 140 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Poland Slovenia Slovak Republic Czech Republic Hungary Mongolia Estonia Romania Latvia Lithuania Bulgaria
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GDP change in FSU economies, 1989 = 100% Fig. 2. GDP change in FSU economies, 1989 = 100% 25 35 45 55 65 75 85 95 105 115 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Central Europe Uzbekistan Belarus Kazakhstan Estonia Turkmenistan Azerbaijan Latvia Lithuania Tajikistan Russia Kyrgyzstan Armenia Ukraine Georgia Moldova
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GDP change in Asian transition economies, 1989=100% Fig. 1b. GDP change in Asian transition economies, 1989 = 100% 40 60 80 100 120 140 160 180 200 1989 1991 1993 1995 1997 1999 2001 2003 China Vietnam Central Europe Uzbekistan Mongolia Turkmenistan Kazakhstan Russia Kyrgyzstan Tajikistan Source: EBRD, World Bank.
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8 Economic performance of transition economies Almost all transition economies have experienced a recession associated with reforms Exceptions: China and Vietnam 1996 GDP as a % of 1989 GDP Albania 87 Romania 88 Belarus 63 Russia 57 Bulgaria 68 Slovakia 90 China* 189 Slovenia 96 Czech Republic 89 Turkmenistan 57 Estonia 69 Ukraine 42 Hungary 86 Uzbekistan 84 Kazakhstan 45 Vietnam 156 Kyrgyzstan 52 Armenia 39 Latvia 52 Azerbaijan 38 Lithuania 42 Croatia 70 Moldova 35 Georgia 31 Mongolia 83 Macedonia FYR 56 Poland 104 Tajikistan 37 * For China - all indicators are for the period 10 years earlier.
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Murder rate increased in most countries during transition Murders per 100,000 inhabitants in 1987 and in 2002 (WHO statistics) y = 1,2507e 0,4158x R 2 = 0,6517 0 5 10 15 20 25 30 35 0 1 2 3 4 5 6 7 8 Murders per 100,000 inhabitants in 1987 Murders per 100,000 inhabitants in 2002 Russia Belarus Ukraine Estonia Kazakhstan Latvia Moldova Albania Tajikistan Lithuania Azerbaijan Georgia Kyrgyzstan Turkmenistan Slovenia
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10 Crime and mortality rates in Russia grew during transition
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Fig. 2 Mortality rate (per 1000) and average life expectancy, years 6 8 10 12 14 16 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 (1st half) Moratlity rate, per 1000 inhabitants 63 64 65 66 67 68 69 70 Average life expectancy, years Mortality (left scale) Life expectancy (right scale)
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Life expectancy at birth, years, China and India, 1960-2002 (WDI) 35 40 45 50 55 60 65 70 75 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 China India
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Human Development Index for China, Belarus, Russia and Ukraine 0,65 0,67 0,69 0,71 0,73 0,75 0,77 0,79 0,81 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Russia Belarus Ukraine China Cuba
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14 Increase in income inequalities in transition economies (source: Milanovic, 1998)
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15 Transformational recession In Central Europe recession lasted for 2-3 years, output declined by 20-30%; pre-reform level of output was reached after 10 years of transition In CIS
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This note was uploaded on 03/19/2012 for the course ECON 3808 taught by Professor Cirina during the Winter '12 term at Carleton CA.

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class 6 - ECON 3808 The Economics of Transition Shock...

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