Output Fall – Transformational Recession
A significant decline in GDP has been a common feature in transition economies. This sharp drop in output has been seen as a surprise and puzzle to many observers. Understanding the nature of the output fall is crucial to understanding transition. Analysis is complicated by measurement issues associated with moving from plan to the market. Theoretical models of the output fall are examined, including those that see the output fall as a natural consequence of the legacies of the Soviet-type economic system.
KeywordsArrears Asset specificity Command economy Coordination problems Double marginalization model Hold-up problem Incomplete contracts Incomplete information Monopoly National income measurement Output fall in transition economies Over-Industrialization Planning Price controls Price liberalization Privatization Search frictions Second economy Technical complementarities Trade dependency Uncertainty problems Value destruction Wage rigidity
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