Aziz, Jahanger, and Robert Wescott, 1997, “Policy Complementarities and the Washington Consensus,” IMF Working Paper 97/118 (Washington: International Monetary Fund).
Aghion, Philippe, and Olivier Blanchard, 1993, “On the Speed of Transition in Central Europe,” Working Paper 6 (London: European Bank for Reconstruction and Development).
Åslund, Anders, 1994, “Lessons of the First Four Years of Systemic Change in Eastern Europe,” Journal of Comparative Economics, Vol. 19, No. 1, pp. 22–38.
Balcerowicz, L., 1993, “Common Fallacies in the Debate on the Economic Transition in Central and Eastern Europe,” Working Paper 11 (London: European Bank for Reconstruction and Development).
Barberis, Nicholas, Maxim Boycko, Andrei Shleifer, and Natalia Tsukanova, 1996, “How Does Privatization Work? Evidence from the Russian Shops,” Journal of Political Economy, Vol. 104, pp. 764–790.
Boardman, Anthony, and Aiden Vining, 1989, “Ownership and Performance in Competitive Environments,” Journal of Law and Economics, Vol. 32, No. 1, pp. 1–33.
Claessens, Stijn, and Simeon Djankov, 1998, “Politicians and Firms in Seven Central and Eastern European Countries,” Working Paper 1954 (Washington: World Bank).
Dabrowski, Marek, 1996, “Different Strategies of Transition to a Market Economy: How Do They Work in Practice?” Working Paper 1579 (Washington: World Bank).
de Melo, Martha, Cevdet Denizer, and Alan Gelb, 1995, “From Plan to Market: The Patterns of Transition” (unpublished; Washington: Transition Economics Division; Policy Research Department, World Bank).
European Bank for Reconstruction and Development, 1999, Transition Report (London: European Bank for Reconstruction and Development).
Earle, John, Roman Frydman, and Andrzey Rapaczynski, 1993, Privatization in the Transition to a Market Economy (Budapest: Central European University Press).
Fischer, Stanley, Ratna Sahay, and Végh, Carlos A. 1996, “Stabilization and Growth in Transition Economies: The Early Experience,” Journal of Economic Perspectives, Vol. 10, No. 2, pp. 45–66.
Frydman, Roman, Cheryl Gray, Marek Hessel, Andrzey Rapaczynski, 1997, “Private Ownership and Corporate Performance: Evidence from Transition Economies,” Research Report 97–128 (New York: C.V. Starr Center for Applied Economics, New York University).
Frydman, Roman, Cheryl Gray, Marek Hessel, Andrzey Rapaczynski, 1998, “When Does Privatization Work?” (unpublished; Privatization Project).
Havrylyshyn, Oleh, Izvorski, Igor and Rooden, Ron van 1998, “Recovery and Growth in Transition Economies 1990–97: A Stylized Regression Analysis,” IMF Working Paper (Washington: International Monetary Fund).
Havrylyshyn, Oleh, and Donald McGettigan, 1998, “Privatization in Transition Countries: A Sampling of the Literature,” IMF Working Paper 99/6 (Washington: International Monetary Fund).
Kolodko, Grzegorz, 1999, “Ten Years of Post-Socialist Transition: The Lessons for Policy Reforms,” World Bank Development Economics Research Group Working Paper 2095 (Washington: World Bank).
Megginson, William, Robert Nash, and Matthias van Randenborgh, 1994, “The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis,” Journal of Finance, Vol. 49, pp. 403–52.
Pistor, Katharina, 2001, “Law as a Determinant for Equity Market Development,” in Assessing the Value of Law in Transition Economies, ed. by Murrell Peter (Ann Arbor, Michigan: University of Michigan Press).
Pohl, Gerhardt, Robert Anderson, Stijn Claessons, and Simeon Djankov, 1997, “Privatization and Restructuring in Central and Eastern Europe,” World Bank Technical Paper 368 (Washington: World Bank).
Roland, Gerhardt, 1994, “On the Speed and Sequencing of Privatization and Restructuring,” Economic Journal, Vol. 104 (September), pp. 1158–68.
Sachs, Jeffrey, 1996, “The Transition at Mid Decade,” American Economic Review, Papers and Proceedings, Vol. 86 (May), pp. 128–33.
Sachs, Jeffrey, 1997, “An Overview of Stabilization Issues Facing the Economies in Transition,” in Economies in Transition: Comparing Asia and Europe, ed. by T.W. Woo, S. Parker, and J. Sachs (Cambridge, Massachusetts: MIT Press).
Sachs, Jeffrey, Clifford Zinnes, and Yair Eilat, 2000a, “Patterns of Economic Reform and its Determinants in Transition Economies: 1990–1998,” CAER II Discussion Paper 61 (Cambridge, Massachusetts: Harvard Institute for International Development).
Sachs, Jeffrey, Clifford Zinnes, and Yair Eilat, 2000b, “The Gains from Privatization in Transition Economies: Is ‘Change of Ownership’ Enough?” CAER II Discussion Paper 63 (Cambridge: Massachusetts: Harvard Institute for International Development).
Shapiro, Carl, and Robert Willig, 1990, “Economic Rationales for the Scope of Privatization,” in The Political Economy of Public Sector Reform and Privatization, ed. by Ezra Suleiman and John Waterbury (Boulder, Colorado: Westview Press).
Sheshinski, E, and L. López-Calva, 1999, “Privatization and Its Benefits: Theory and Evidence,” CAER II Discussion Paper 35 (Cambridge: Massachusetts: Harvard Institute for International Development).
Stiglitz, Joseph, 1998, “More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus,” WIDER Annual Lectures 2 (Helsinki: United Nations University World Institute for Development Economics Research).
Williamson, John, 1990, “What Washington Means by Policy Reform,” in Latin American Adjustment: How Much has Happened? ed. by Williamson John (Washington: Institute for International Economics).
Williamson, John, 1997, “The Washington Consensus Revisited,” in Economic and Social Development into the XXI Century, ed. by L. Emmerij (Washington: Inter-American Development Bank).
Zinnes, Clifford, Yair Eilat, and Jeffrey Sachs, 2001, “Benchmarking Competitiveness in Transition Economies,” Economics of Transition, Vol. 9, No. 2, pp. 315–53.
Clifford Zinnes is Director of Research Coordination at the IRIS Center, Department of Economics, University of Maryland, College Park. Yair Eilat is a PhD. candidate in the Department of Economics at Harvard University. Jeffrey Sachs is the director of the Center for International Development at the Kennedy School of Government and the Galen L. Stone Professor of International Trade at Harvard University. This research was funded under USAID Task Order PCE-Q-()0–95-(XX) 16–00 and grants from the Harvard Institute for International Development and the Center for International Development, both at Harvard University. This paper was submitted to IMF Staff Ropers in November 2000. We would like to thank Luis López-Calva, Lawrence Camp, Oleh Havrylyshyn, Orest Koropecky, Charles Mann, and János Szyrmer, and express appreciation for the tireless research assistance of Georgi Kadiev, Hongyu Liu, Chris Saccardi, and Irina Tratch.
The other two are Sachs, Zinnes, and Eilat (2000a). which develops an initial conditions typology of countries in transition and creates indicators for gauging progress in reforms and performance over the transition period, and Zinnes, Eilat, and Sachs (2001), which benchmarks competitiveness of transition countries in the years 1997–98.
While this survey (see Sachs, Zinnes, and Eilat, 2000a) includes Albania, we have dropped it from the analysis in the present paper owing to lack of data for a number of key variables.
Controlling for institutional differences, they test several propositions of Shleifer and Vishny (1994) regarding how privatization and stabilization affect firm behavior.
For this purpose, we used a computer program that assigns countries to clusters in a way that minimizes intracluster differences and maximizes inter-cluster differences according to a chosen list of variables. The categories of initial condition variables we used include physical geography, macroeconomics, demographics and health, trade and trade orientation, infrastructure, industrialization, wealth, human capital, market memory, physical capital, culture, and political situation.
An alternative approach to control for initial conditions is to explicitly include initial condition variables in the regression. See, for example, de Melo, Denizer, and Gelb (1995), who use principal components analysis to cluster (i.e., reduce the number of) variables rather than countries.
Year of beginning of transition: 1990: Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia; 1991: Croatia, Macedonia, Slovenia; 1992: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyz Republic, Lithuania, Latvia, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan.
The values of these dummies are available from the authors. Our analysis shows that most of the cluster and transition year dummies are statistically significantly different from one another, providing support for their inclusion in the regressions. See Sachs, Zinnes, and Eilat (2000b) for a detailed discussion of the methodology and interpretation of results.
All indicators are scaled to have a mean of zero and a variance of unity across the 25 countries and years 1990–98 of transition.
This approach differs from other papers in the literature—for example, de Melo, Denizer, and Gelb (1995): Havrylyshyn, Izvorski, and van Rooden (1998); and Fischer, Sahay, and Végh (1996), who use the annual growth rate of real gross domestic product as a dependent variable and not growth since 1989.
An alternative is to use log of inflation as a proxy for macro stabilization (see Fischer, Sahay, and Végh, 1996).
When we decompose the reform indicators into its components, we find that capital market development has the strongest positive effect on performance.
Though not reported here, these results do not change when we replace contemporaneous COT by COT lagged for one or two years.
It is especially interesting to see that in the regressions where more than one quadratic term is included, not only does COT*OBCA maintain its significance, but the other quadratic terms do not prove to be significant.