Are reforms from a centrally planned to a market system bad for health?

Alerted by the dramatic mortality increase in Russia after the onset of transition, and inspired by Sen (1997) to interpret mortality as an indicator of economic performance, mortality data is used as the benchmark, by which to judge the success or failure of transition in Central and Eastern Europe. In particular, it is examined whether reforms from a centrally planned to a market system did have a detrimental effect on health during transition, as it has allegedly been the case in Russia. Controlling for other determinants of health such as GDP growth and health provision, the hypothesis that reforms are bad for health cannot be supported. Instead, good reforms do have a beneficial effect, quite independently of GDP growth. In the 23 countries examined for the period 1989-96, health provision can only account for the development of infant, child and female mortality rates, but not for adult male mortality, which seems to be largely due to stress-related phenomena, that are generally considered to be quite unrelated to health care provision. Further, in contrast to the growth in transition-literature, there seems to be no trade-off between short-term costs and longterm benefits of reform. Good reform directly translates into better health. Several mechanisms are discussed to shed light on the link between good reform and good health. A particularly worrying trend with potentially wide-ranging long-term implications for the CEECs' development paths derives from the observation of a substantial degree of divergence in health status across the region, given the important role of health in determining future growth prospects.