Complementarities in economic reform |
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Authors: | Eric J Friedman Simon Johnson |
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Institution: | Department of Economics Rutgers University New Jersey Hall Hamilton Street New Brunswick, NJ 08903;Fuqua School of Business Duke University Box 90120 Durham, NC 27708–0120 TEL:919 660 7817 |
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Abstract: | The authors report on technical work which examines the implications of combining complementarities and convex adjustment costs in a model of economic reform. The main results are that the optimal pace of reform is higher if there is a larger initial crisis, stronger pro-reform institutions, and greater immediate potential entrepreneurship. This supports the argument that radical reform was appropriate for most countries in Eastern Europe and the former Soviet Union, while gradualism was more appropriate for a country like China. |
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Keywords: | complementarities restructuring reform |
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