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Oxford University Press The Economics of Post-Communist Transition by Olivier Blanchard
This work examines the process of economic reform in five European countries - Poland, Hungary, the Czech and Slovak Republics, and Bulgaria. The author argues that two basic machanisms dominate transition. The first is the reallocation between the state sector and the private sector, with contraction of activities in the former and expansion in the latter. The second is the restructuring of the old state sector, with scope for large improvements in productivity. Against this background, the focus shifts to three particular factors: the adjustment of employment and wages in state firms to the initial shock of reduced demand for their goods, the dynamics of restructuring and privatization, and the relationship between reallocation, restructuring, and the traffic in the labour market. The final section puts the discussion together to build a general equilibrium model as a preliminary to the analysis of three sets of issues: the role between unemployment benefits and privatization rules, the interaction between transition and fiscal policy, and the evolution of the support for reform. The model is used to address the issue of the ideal speed for reform.show more