The Role of Institutions in a Comparative Perspective Transition Economies: A Peculiar Pattern of Growth

Authors examine the present state of art in conducting reforms among transition economies and briefly discuss the issue of the endogeneity of the transition process. Relying upon these findings they investigate what role the speed and/or progress in reforms play in enhancing economic growth and output level of a transition economy. It is shown that initial, inherited conditions determine both – growth and transition progress. Transition progress alone had some influence on growth in the first phase of transition but further on becomes insignificant. However, the impact of initial GDP level is evident during entire period of transition provoking a peculiar outcome: more developed economies perform better. Analysing growth under transition in the longer run authors examine how transition economies behave in comparison with the standard long term models of growth. It was shown that after 18 years of transition reforms the economies in question still structurally differ from market economies. Consequently, the long run growth models cannot explain growth in transition countries as they do in market economies although some modest changes can be remarked. Finally, authors conclude that the observed peculiarities prevent transition economies to catch up more developed countries