The Relationship between Economic Growth and the Speed of Liberalization During Transition

The paper examines existing results on the relationship between growth performance and speed of liberalization during transition. Several influential studies contain methodological problems that preclude interpretation of their results as bearing on the effects of speed of reform and that suggest their results might be subject to endogeneity bias. We address these problems in a simultaneous equations framework. We find that policy change is less important than initial conditions during the first four years of transition. However, growth performance has a strong effect on the speed of liberalization