Chapter 4: Performance
In this chapter I will review some of the main quantitative measures of performance of the transition economies during the 1990s. Much of the early assessment of performance focused on the measures commonly applied to established market economies, such as the inflation rate and the growth of output as captured in gross domestic product. With the awareness of rising poverty in eastern Europe and the former Soviet Union, during the second half of the 1990s growing attention was paid to the distribution of income and to levels of poverty. In the context of transition, all of these indicators involve significant measurement problems, but there is at least some agreement over gross orders of magnitude. Although all empirical work in economics involves measurement issues, it must be stressed that these are especially acute in the transition context.1 There are both practical data collection problems and conceptual issues. Under central planning, output was often over-reported either to convince planners that targets had been met or as scams (as in the Uzbek republic’s cotton scandals), but with transition to a market-based economy output is more likely to be under-reported to avoid regulators and tax collectors or because national statistical offices fail to cover new enterprises.2 Even more important are index number problems similar to those for the USSR in the 1930s; when the output mix changes, calculated output growth differs depending upon whether base-year or end-year weights are used. Pre-transition prices were artificial. Some outputs had no real value (‘pure socialist production’ is...
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