Liberalization and the Behavior of Output During the Transition from Plan to Market

29 Pages Posted: 15 Feb 2006

Date Written: April 1997

Abstract

This paper deals with liberalization and the evolution of output during the transition from plan to market. It explains why strong liberalization leads to a comparatively steep fall in output early in the transition, but a relatively strong recovery later on. Because it takes time to restructure the capital stock inherited from the old system, liberalization initially leads to transitional unemployment of capital and the contraction of the old enterprise sector. By making room quickly for the new, more efficient enterprises, however, liberalization also sets the stage for recovery and a much higher level of income in the medium term.

Keywords: Output, Liberalization, Transition

JEL Classification: E23, P21, P27, P52

Suggested Citation

Hernández-Catá, Ernesto, Liberalization and the Behavior of Output During the Transition from Plan to Market (April 1997). IMF Working Paper No. 97/53, Available at SSRN: https://ssrn.com/abstract=882313

Ernesto Hernández-Catá (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4531 (Phone)

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