Transition from plan to market

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Transition from plan to market

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Title: Transition from plan to market
a PIE analysis
Author: Mygind, Niels
Abstract: This paper gives an overview over how far transition has proceeded and what is still lacking in the process. First the analytical framework – the PIE model for Politics, Institutions, Economy – is introduces. The model is first used to point to the main reasons for the fall of the command economy. Then it is used to identify the barriers for transition of the institutional system and the restructuring of the economy. This includes an analysis of the different factors behind the steep fall in production in the first years of transition. It is shown that countries implementing a tough stabilization and a comprehensive and consequent liberalization have been most successful in the process. A fast and comprehensive privatization, on the other hand, has not been sufficient for the necessary restructuring of enterprises. Decisive for success in transition has been transformation of the state as a crucial part of the development of new political and economic institutions implementing well functioning, clear and stable rules of the game for private enterprises. The institutional development has been important for the attractiveness of foreign investments - important for restructuring enterprises as part of a positive circle for the transition process.
URI: http://hdl.handle.net/10398/7983
Date: 2009-12-18

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