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Title:Structural change in transition economies: Does foreign aid matter? PDF Logo
Authors:Fardmanesh, Mohsen
Tan, Li
Issue Date:2009
Series/Report no.:Center Discussion Paper, Economic Growth Center 982
Abstract:This paper addresses whether the initial declines in the manufacturing and real wages in transition economies were anything unexpected to justify policy reversal, and whether the often-recommended foreign aid would have helped them curb these declines in any significant way. It answers these questions with the help of a two-sector three-factor small open economy model and simulation exercises. It concludes that, given the relative price distortions and the market disequilibria that transition economies inherited from their planning era, the initial declines in their manufacturing and real wages are to be mostly expected. Foreign aid, whose mpact is noticeable only when it is in excess of 5% of GDP, does not curb the decline in their real wages in any measurable way and exacerbates the decline in their manufacturing by a few percent.
Subjects:liberalization
structural adjustment
transition economies
East European economies
Soviet Republics
foreign aid
JEL:P2
Document Type:Working Paper
Appears in Collections:Center Discussion Papers, Economic Growth Center (EGC), Yale University

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