Artur Radziwill and Oleg Petrushin The inability of societies to develop eﬀective, low-cost enforcement of contracts is the most important source of both historical stagnation and contemporary underdevelopment in the Third World. Douglass North 1. INTRODUCTION Gur Ofer (2000) oﬀers an appealing metaphor of transition. In this metaphor communist and developing economies have long travelled distinctly diﬀerent roads with the same aim of full economic modernization. When the communist countries hit a dead end in the late 1980s, transition was an attempt to converge to the market-based road without losing the previously covered distance. Central European countries are close to achieving this goal and are now members of the Organization for Economic Cooperation and Development (OECD), and at the gates of the European Union and NATO. Other countries were less successful, and Moldova is one of the least fortunate.1 In the world of Ofer’s metaphor, Moldova was subject to a dramatic reversal, which largely eliminated its previous achievements. It is enough to state that the output in Moldova during the 1990s retreated to the level of the late 1950s and early 1960s (De Broeck and Koen, 2000). Moldova has yet to ﬁnd a new sustainable development path. For now it is still trapped in a web of uncoordinated policies and dysfunctional institutions. This chapter attempts to oﬀer a comprehensive and consistent picture of growth in the Republic of Moldova under transition to a market economy. Developments in Transnistria, the self-proclaimed separatist territory on the left bank...
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