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BUSINESS ENVIRONMENT, START-UPS, AND PRODUCTIVITY DURING TRANSITION

Published online by Cambridge University Press:  14 May 2012

Zuzana Brixiová  and
Balázs Égert
Zuzana Brixiová*
Affiliation:
UNDP Swaziland and African Development Bank
Balázs Égert
Affiliation:
Organization for Economic Cooperation and DevelopmentEconomiX at the University of Paris X-NanterreCESifo and William Davidson Institute
*
Address correspondence to: Zuzana Brixiová, Lilunga House, 5th Floor, Somhlolo Road, Mbabane, Swaziland; e-mail: zuzana.brixiova@undp.org.
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Abstract

The transition paths from plan to market have varied markedly across countries. Central and Eastern European and Baltic countries, which opted for fast and deep reforms including transformation of their business environments, rapidly narrowed the productivity gap with advanced economies. In contrast, in countries of the Commonwealth of Independent States, which embarked on reforms later and with less depth, the productivity gap remains large. Whereas the literature has focused mainly on empirical studies, this paper develops a dynamic search model of firm start-ups that reflects these trends. The model shows that an enabling business climate contributes to start-ups of highly productive firms at an earlier stage of transition, underscoring the importance of early reforms. The role of the state sector as an employer during transition rises in countries where reforming the business environment is particularly costly.

Keywords

Dynamic Search ModelBusiness EnvironmentPrivate Sector GrowthProductivity
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Supplement S2: Time-Varying Modeling with Macroeconomic and Financial Data , September 2012 , pp. 213 - 231
Copyright
Copyright © Cambridge University Press 2012

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