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The Economic Prospects of the CIS

Sources of Long Term Growth

Edited by Gur Ofer and Richard Pomfret

This book brings together ten original studies on the transition and growth experience and the foundations for long-term growth of the newly independent states created by the dissolution of the Soviet Union.
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Chapter 2: Down and up the stairs: paradoxes of Russian economic growth

Ksenia Yudaeva, Maria Gorban and Vladimir Popov


Ksenia Yudaeva, Maria Gorban, Vladimir Popov and Natalya Volchkova 1. INTRODUCTION Russia’s economic performance during the first transition decade was one of the worst among transition economies. Output decline was deeper and lasted longer than in the countries of Eastern and Central Europe and in most of the CIS countries not affected by war. What caused such a bad performance? This chapter, following Popov (2000) and Berglof and Bolton (2002), attributes Russian growth failure to the collapse of the government. Early literature on the subject concentrated on the ‘competition’ between reform policies and initial conditions as the main determinants of growth during the first transition period. While proponents of the first theory claim that faster-reforming countries had stronger growth, their opponents point to the fact that faster-growing countries also had better initial conditions. The emerging consensus of this literature is that initial conditions matter for the depth of initial decline, and depth and speed of the reform progress determines the speed of the recovery (see Berg et al., 1999; Fischer and Sahay, 2000; Campos and Coricelli, 2000 and so on). Some CIS countries, such as Uzbekistan, still do not fit this picture. Zettlemeyer (1998) attributes Uzbekistan success to favourable initial conditions, such as natural resource abundance (cotton, some non-ferrous metals) and self-sufficiency in energy, but Spechler et al. (Chapter 8, this volume) attribute it to better, though non-conventional policies. Russia has oil, and is self-sufficient in energy, so it is not clear, if based on initial conditions...

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