Economic growth and the speed of reform: An empirical analysis of the transition experience in China, Eastern Europe and the former Soviet Union

What is the relationship between economic growth and the speed of reform in the transition from a centrally planned to a market economy? Existing empirical work on Eastern Europe and the former Soviet Union (EEFSU) contains several conceptual flaws, undermining the results achieved. I obtain different conclusions from those in the literature, in part by recognizing the simultaneous nature of the links between growth and the speed of reform. The results demonstrate that a thriving economy provides an environment conducive to faster reforms. Developing and estimating econometric models comparing the Chinese dual-track system with policies in EEFSU extends the analysis of this relationship, finding that the dual-track system is a positive factor in economic performance during transition.; Analysis of both cross-sectional and panel data leads to two main conclusions. First, the findings show that initial conditions significantly affect both growth and the speed of liberalization in the early years of reform. However, with minor exceptions, their influence fades considerably after the first two years of reform. These results imply that differing initial conditions, while having an impact on the initial results of reform, cannot explain the divergent results across countries further along in the reform process.; Second, previous work ignores the endogenous nature of the relationship between growth and the speed of reform by assuming that the speed of liberalization affects growth rates, without recognizing the converse possibility. My empirical work reveals that the relationship between growth and the speed of liberalization is not unidirectional.; The second half of the dissertation provides a comparative econometric analysis of the Chinese and European transition processes. Theory suggests that the dual-track system, where the state plan and newly developing market economy co-exist, has been an important factor in allowing China to avoid economic collapse, a hypothesis that has not been tested in existing empirical work. The empirical work in this dissertation confirms that the dual-track system increases growth relative to a system in which the planning mechanism is abolished, with two channels promoting growth: the increasing liberalization of the market segment of the economy, and the stabilizing force of the plan.