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Table 1 economic growth and inequality in transition

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Table 1. Economic growth and Inequality in transition countries with different political regimes Political Regime in 1998- 2000 Real GDP, Average Indices in 2000, 1989=100 Average Gini Index 1987-1990 Average Gini Index 1996-1998 Free 91.9 0.21 0.32 Partly Free 56.8 0.29 0.44 Not Free 84.2 0.27* 0.35* Source: Freedom House; Economic Survey of Europe, 2003, No. 1, p. 224; World Bank, 2002, p. 9. *Calculated as average for Belarus, Kazakhstan, and Turkmenistan. 5. Rate of growth and democratization: econometric studies 5.1. Notations and data sources Below, we use the following notation and data sources. y - average growth rate of PPP GDP per capita in 1975-99. This and other economic indicators are taken from World Development Indicators database for 1970-1999. It contains data on more than 100 countries. Not all data for each country are available, however. 13
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Y - PPP GDP per capita in 1975 RL - Rule of Law index for 2000/2001 (World Bank 2002; Kaufmann, Daniel, Kraay, Aart, and Zoido-Lobatón Pablo, 1999); it is based on polls of expertsand surveys of residents, and changes from –2.5 to +2.5 (the higher, the stronger the rule of law). - Democratization in 1970-2000, measured as the change of Freedom House indices of political rights, ranging from 1 to 7 for every year; the absolute level shows the degree of authoritarianism, whereas change, or democratization shows the increase in democracy. ( ) D- Average level of democracy in 1972-75 (lower values mean more democracy) ( ) IC - average 1984-1990 investment climate index from the International Country Risk Guide: it ranges from 0 to 100%, higher values mean better climate (World Bank, 2001). IC 2000 - 2000 Investment Climate index from the International Country Risk Guide (World Bank, 2001). n - average population growth rate in 1975-99 I - average investment/GDP ratio in 1975-99 CPI - average Corruption Perception Index for 1980-85 (Transparency International, 54 countries); CPI 2002 - average Corruption Perception Index for 2002-2003 (Transparency International); GE - Index of government effectiveness in 2001 (WDI, 2001; Kaufmann, Daniel, Kraay, Aart, and Zoido-Lobatón Pablo, 1999) S 1 - average share of the shadow economy in GDP in the 1990s, 1 st estimate (Hellman, Jones, and Kaufmann, 2000). S 2 - average share of the shadow economy in GDP in the 1990s, 2 nd estimate (Hellman, Jones, and Kaufmann, 2000). rev 1999 - average share of central government revenues in GDP in 1995-99 as a % of 1971-75 Rev - average share of central government revenues in GDP in 1971-75, % FI - average share of net fuel import in 1960-1975 in total import Is - dummy, equal to 1 if a country belongs to The Organization of the Islamic Conference Democratization indices are from Freedom House – indices of political rights, ranging from 1 to 7 for every year (the absolute level shows the degree of authoritarianism, whereas change, or democratization shows the increase in democracy). A proxy for the law and order is the investment 14
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climate index from the International Country Risk Guide (World Bank, 2001). Investors care more about guarantees and predictability of property and contract rights than about democratic/political Table 2. Description statistics for new democracies (countries where Freedom House index of
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