2002), ‘Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet

The theme of this paper is the microeconomics of economic growth in Central and Eastern Europe (CEE) and the Newly Independent States (NIS) over the period 1950-2000. The key structural change in this region is the end of the socialist regime in 1989 and 1992, and the subsequent attempt at transition to a market economy. We begin the paper with an examina-tion of the key legacies from the socialist period. We then examine the key microeconomic actors in transition economies: households, enterprises, and government officials. Although there are many common processes at work, differences in economic performance tend to coincide with the geographical divide. Legacies play an important part. We also argue that differences in openness also plays an important role in generating different outcomes. These factors, combined with defects in the political and legal system, have given rise to a vicious circle of resistance to reform in the NIS. ∗This paper is a part of the Global Research Project Explaining Growth sponsored by the Global Development Network. The views expressed are those of the authors and should not be attributed to the World Bank and other sponsors. We thank Gur Ofer and Lyn Squire for their numerous suggestions and advice at many stages of this work. We are also gratefu