Working Paper: CEPR ID: DP1035
Authors: Jacques Melitz; Claire Waysand
Abstract: The paper develops two economic grounds for gradualism in the context of the Russian move towards a market economy: one for the support of output through subsidies, another for similar support through credit. The first argument relates to the usual case for softening the blow to a sector hit by an adverse, permanent shock. The other argument depends on the absence of a well-functioning capital market. Having presented the two arguments, we discuss the extent to which they justify the course of Russian policy. Essentially we show that the arguments support much less gradualism than actually took place in Russia in 1992 and 1993.
Keywords: Russia; Socialist Economies; Transition; Unemployment; Credit; Subsidies
JEL Codes: E20; P20; P21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government aid (F35) | economic stability (E63) |
| subsidies (H20) | collapse of output and employment (E23) |
| absence of government aid (H84) | collapse of output and employment (E23) |
| credit availability (G21) | production stability (C62) |
| credit crunch (E51) | drop in output (E23) |
| credit crunch (E51) | rise in prices (E31) |