Transitions and Growth in Post-Soviet Europe
Appendix B: Political Influence, Economic Performance and Reform Efforts: An Econometric Analysis of Six Newly Independent Countries, 1989–1999
Appendix B. Political inﬂuence, economic performance and reform efforts: an econometric analysis of six newly independent countries, 1989–1999 Here we develop an econometric model linking voting decisions, economic reforms and economic performance. In this model politics inﬂuences economics and economics inﬂuences politics. We brieﬂy review the integration of ﬁve generic economic reforms (price liberalization, property privatization, macroeconomic stabilization, trade liberalization and industry restructuring and deregulation) into the growth model framework.1 In section 2 we link analysis of growth and reforms to voting behavior. Next we model the relationship between decisions by voters, proposals by reformers and election outcomes.2 Finally, we model an intertemporal sequence linking historical economic performance and proposed reforms to decisions by voters in elections. We also argue that reform regimes carry the effects of the past on to contemporary economic performance. Reform regimes follow from election outcomes and votes for reformers depend on prospective reforms. Thus we encounter possible simultaneous equation bias. We model this in section 3. Before dealing with data we analyze in section 4 the concern that votes do not reﬂect pocketbook issues. Some people choose not to vote at all and others vote for non-economic reasons. We model this problem employing analysis from the labor market supply literature. In section 5 we explain construction of the variables for reform and voting to be used in subsequent analysis.3 We begin the empirical analysis in section 6 with a model using simple (crude) binomial (0 – 1) dummy variables for...
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