Complementarities in economic reform

Eric J. Friedman and Simon Johnson

The Economics of Transition, 1996, vol. 4, issue 2, pages 319-329

Abstract: The authors report on technical work which examines the implications of combining complementarities and convex adjustment costs in a model of economic reform. The main results are that the optimal pace of reform is higher if there is a larger initial crisis, stronger pro-reform institutions, and greater immediate potential entrepreneurship. This supports the argument that radical reform was appropriate for most countries in Eastern Europe and the former Soviet Union, while gradualism was more appropriate for a country like China. Copyright 1996 The European Bank for Reconstruction and Development.

Date: 1996
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