Why Slow Reformers Grow Fast: Revising the Determinants of Growth in Transition Economies

Abstract

This paper contributes to a growing literature on the determinants of economic growth in the post-communist transition region that goes beyond the prior emphasis of the literature on market economic reforms. Using new data and a battery of causal inference methodologies, we verify earlier studies that show that market economic reforms did not have a significant impact on long-run growth. Instead, we show that variation in growth rates can be ascribed to rising oil and gas revenues and lower government spending, which have allowed slow reforming countries to converge with or surpass the growth rates of reform leaders. This paper raises important questions about the transition economic agenda of the 1990s and has important implications for developing countries considering or rejecting economic reforms.