Working Paper: CEPR ID: DP1928
Authors: Jozef Konings; Patrick Paul Walsh
Abstract: Most post-communist economies are characterized by an initial collapse in aggregate output. Blanchard and Kremer (1997) and Roland and Verdier (1997) have recently modelled supply side distortions (disorganization in the links of production) that can lead to a short-term output contraction after market liberalization and a recovery thereafter. This paper is the first to illustrate and test the effects of disorganization in the transition process by using a unique data set of 300 Ukrainian firms. Our results show that, for firms that existed under central planning, disorganization constrains employment and productivity growth during the transition process to a market economy. In contrast, disorganization plays no role in the determination of employment and productivity growth in newly established private firms.
Keywords: disorganization; transition process; de novo firms
JEL Codes: 0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Disorganization (L29) | Performance of de novo firms (L25) |
| Traditional firms face challenges in maintaining stable supplier relationships (L14) | Employment Growth (O49) |
| Traditional firms face challenges in maintaining stable supplier relationships (L14) | Productivity Growth (O49) |
| Disorganization acts as a barrier to entry for some sectors (L19) | Successful entrants avoid inefficiencies faced by traditional firms (L25) |
| Disorganization (L29) | Employment Growth (O49) |
| Disorganization (L29) | Productivity Growth (O49) |