Transition and the output fall
Roland, Gérard and Verdier, Thierry (1999) Transition and the output fall. Economics of Transition, 7, (1), 1-28. (doi:10.1111/1468-0351.00002).
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We present a model to explain why in the transition economies of Central and Eastern Europe an important output fall has been associated with price liberalization. Its key ingredients are search frictions and Williamsonian relation-specific investment, implying that new investments are made only after having found a new long-term partner. When all firms search for new partners, output may fall because of three effects: a) disruption of previous production links, b) a fall in investment, and c) capital depreciation due to the absence of replacement investment. We show that forms of gradual liberalization like the Chinese 'dual-track' price liberalization may avoid the transitory output fall.
|Digital Object Identifier (DOI):||doi:10.1111/1468-0351.00002|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||University Structure - Pre August 2011 > School of Social Sciences > Economics
|Date Deposited:||14 Dec 2007|
|Last Modified:||06 Aug 2015 02:30|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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