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Soviet power plus electrification: what is the long-run legacy of communism?

Author

Listed:
  • Wendy Carlin

    (University College London and CEPR)

  • Mark Schaffer

    (Heriot-Watt University)

  • Paul Seabright

    (Toulouse School of Economics and CEPR)

Abstract
Two decades after the end of central planning, we investigate the extent to which the advantages bequeathed by planning in terms of high investment in physical infrastructure and human capital compensated for the costs in allocative inefficiency and weak incentives for innovation. We assemble and analyse three separate types of evidence. First, we find that countries that were initially relatively poor prior to planning benefited more, as measured by long-run GDP per capita levels, from infrastructure and human capital than they suffered from weak market incentives. For initially relatively rich countries the opposite is true. Second, using various measures of physical stocks of infrastructure and human capital we show that at the end of planning, transition countries had substantially different endowments from their contemporaneous non-transition counterparts. However, these differences were much more important for poor than for rich countries. Finally, we use firm-level data to measure the cost of a wide range of constraints on firm performance, and we show that after more than a decade of transition in 2002–05, poor transition economies differ much more from their non-transition counterparts, in respect to both good and bad aspects of the planning legacy, than do relatively rich transition countries. However, the persistent beneficial legacy effects disappeared under the pressure of strong growth in transition economies in the run-up to the global financial crisis.

Suggested Citation

  • Wendy Carlin & Mark Schaffer & Paul Seabright, 2012. "Soviet power plus electrification: what is the long-run legacy of communism?," Working Papers 43-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised Jul 2014.
    • Handle: RePEc:mcr:wpaper:wpaper00043
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    File URL: http://www2.unimc.it/sviluppoeconomico/wpaper/wpaper00043/filePaper
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Foreman-Peck, James & Zhou, Peng, 2022. "R&D subsidies and productivity in eastern European countries," Economic Systems, Elsevier, vol. 46(2).
    2. Hana Nielsen, 2016. "East versus West: Energy transition and energy intensity in coal-rich Europe, 1830-2000," Working Papers 16024, Economic History Society.
    3. Foreman-Peck, James & Zhou, Peng, 2021. "Innovation policy and performance of Eastern European Countries," Cardiff Economics Working Papers E2021/15, Cardiff University, Cardiff Business School, Economics Section.
    4. Pradeep Mitra & Alexander Muravyev & Mark Schaffer, 2014. "Labor reallocation and firm growth: benchmarking transition countries against mature market economies," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-22, December.
    5. Rajag M. Nag & Johannes F. Linn & Harinder S. Kohli (ed.), 2016. "Central Asia 2050: Unleashing the Region's Potential," Books, Emerging Markets Forum, edition 1, number centasia2050, July.
    6. Nielsen, Hana & Warde, Paul & Kander, Astrid, 2018. "East versus West: Energy intensity in coal-rich Europe, 1800–2000," Energy Policy, Elsevier, vol. 122(C), pages 75-83.
    7. Wendy Carlin & Mark Schaffer, 2012. "The Business Environment in the Transition," CESifo Working Paper Series 3934, CESifo.
    8. Klaus Friesenbichler & Oliver Fritz & Werner Hölzl & Gerhard Streicher & Florian Misch & Mustafa Yeter, 2014. "The Efficiency of EU Public Administration in Helping Firms Grow," WIFO Studies, WIFO, number 50931.
    9. Hartmut Lehmann & Mark E. Schaffer, 2019. "Transition, Convergence, and Labor Market Adjustment in Prospect and in Hindsight," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(03), pages 09-12, October.
    10. Friesenbichler, Klaus & Fritz, Oliver & Hölzl, Werner & Misch, Florian & Streicher, Gerhard & Yeter, Mustafa, 2014. "The efficiency of EU public administration in helping firms grow: Final report," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 111450.
    11. Aktoty Aitzhanova & Shigeo Katsu & Johannes F. Linn & Vladislav Yezhov (ed.), 2014. "Kazakhstan 2050: Toward a Modern Society for All," Books, Emerging Markets Forum, edition 1, number kazakh2050, July.
    12. Nielsen, Hana, 2017. "Productive efficiency in the iron and steel sector under state planning: The case of China and former Czechoslovakia in a comparative perspective," Applied Energy, Elsevier, vol. 185(P2), pages 1732-1743.

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    More about this item

    Keywords

    business environment; transition; institutions; infrastructure; planned economy;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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