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Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition

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  • Ms. Katrin Elborgh-Woytek
  • Mr. Julian Berengaut

Abstract

The paper analyzes the initial output decline in transition economies by estimating a crosssection model stressing two major factors-conflicts and the legacies of the Soviet period. We link the Soviet legacies in place at the outset of the transition to the subsequent path for the development of market-related institutions. Institutional development (as proxied by measures of corruption) is used as an intermediate variable. An instrumental variable approach is followed to derive estimates that are not biased by the possible endogeneity of corruption with respect to output developments. Assuming that the extent of Soviet legacies was positively correlated with the length of the communist rule allows us to use the years under the Soviet regime as an instrument.

Suggested Citation

  • Ms. Katrin Elborgh-Woytek & Mr. Julian Berengaut, 2005. "Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition," IMF Working Papers 2005/068, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2005/068
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    References listed on IDEAS

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    Cited by:

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    2. Mr. Andrew J Tiffin, 2006. "Ukraine: The Cost of Weak Institutions," IMF Working Papers 2006/167, International Monetary Fund.
    3. Luiz Fernando de Paula, 2007. "FINANCIAL LIBERALISATION, EXCHANGE RATE REGIME AND ECONOMIC PERFORMANCE IN BRICs COUNTRIES," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 016, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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