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

Wendy Carlin, Mark Edwin Schaffer, Paul Seabright

Research output: Contribution to journalArticle

14 Citations (Scopus)

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, formerly planned countries had substantially different endowments from their contemporaneous market economy 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 ex-planned economies differ much more from their market counterparts, in respect to both good and bad aspects of the planning legacy, than do relatively rich ones. However, the persistent beneficial legacy effects disappeared under the pressure of strong growth in the formerly planned economies in the run-up to the global financial crisis.
Original languageEnglish
Pages (from-to)116-147
JournalExplorations in Economic History
Volume50
Issue number1
Early online date20 Jul 2012
DOIs
Publication statusPublished - Jan 2013

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