Will the Future Be Better Tomorrow? The Growth Prospects of Transition Economies Revisited

The favored approach in the literature on the growth prospects for transition economies is based on specifications from Barro (1991) and Levine and Renelt (1992). This paper examines this literature critically by identifying and testing for the underlying assumptions. Our main finding is that this approach performs poorly in the transition context. Our results indicate that, almost a decade after the transition began, the former centrally planned economies are still structurally different from market economies at similar levels of per capita income. The legacies of central planning are more resilient than previously thought. J. Comp. Econ., December 2001, 29(4), pp. 663–676. University of Newcastle, Newcastle upon Tyne, and Centre for Economic Policy Research, London, United Kingdom; and The William Davidson Institute at the University of Michigan, Ann Arbor, Michigan. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: E23, O40, P20, P52.