1 A Comparative Analysis of Productivity Growth, Catch-Up and Convergence in Transition Economies

The paper examines the macroeconomic performance of 25 transition economies using a comparable data set for 1991-2000. Centrally planned economies were criticized for wide-spread economic inefficiency and low total factor productivity growth. In order to see whether transition to market based economy increased economic efficiency, technical progress, and total factor productivity, we estimate efficiency measures for East European, Baltic, and the other Former Soviet Union Countries using Stochastic Frontier Analysis and Data Envelopment Analysis. The average annual efficiency level for 25 transition economies is 0.559 over the period 1991-2000. The average annual growth in technical efficiency is 2.8 percent over the same period. This efficiency change (or catch-up) in transition economies suggests that there is a mixture of increasing and decreasing efficiency levels for the whole period. The average annual technical change in transition economies is-19 percent over the period examined. That is, there is no technological progress, but over the whole period there has been technological decline. As a result, the average annual total factor productivity change for each of 25 transition country has declined due to huge negative technical change and a slight positive efficiency change. The sum of technical and technical changes is 16.2 percent. That is, the average annual total factor productivity has declined by 16.2 percent over the period 1991-2000. These results suggest that, on average, technical efficiency change or catch-up is overcompensated by the declining technical change