Entrepreneurship and Transition

While output andemployment in the overextended and overmannedstate sector decrease, it is crucial for thesuccess of transition that privateentrepreneurship builds up, increasingproduction and employment, in a processsomewhat paralleling the dual developmentHarris-Lewis-Todaro model, where the statesector plays the role of the traditional sectorendowed with an almost unlimited reserve oflabour. The way this takes place depends to agreat extent not only on the specific featuresof the privatisation processes pursued, butalso on the overall institutional and socialconditions affecting the development, and thenature, of private entrepreneurship. Inparticular, under conditions of insufficientconstruction of the institutional framework ofthe market, and lack of prevention andpunishment of fraudulent behaviour andself-dealing, the development ofentrepreneurship can be derailed intounproductive and destructive forms, accordingto Baumol's distinction, with dire economic andsocial consequences. The different outcomes ofthe transition process may also be explainedthrough the different preconditions affectingthe severity of the specific impedimentsencountered in development of entrepreneurship.Some policy suggestions for speeding up thisdevelopment, both in quantitative andqualitative terms, conclude the paper.