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| Acknowledgments | |
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| Introduction: Transition and Economics | |
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| Understanding Transition | |
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| Little Prior Knowledge Before Transition | |
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| Surprises of Transition | |
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| The Initial Situation before Transition | |
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| Objectives and Constraints of Transition | |
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| Stylized Facts about Transition | |
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| Differences in Reform Paths and Strategies | |
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| Differences in Macroeconomic Performance after Liberalization | |
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| Differences in Enterprise Performance in Response to Changes in Ownership and Corporate Governance | |
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| Summary | |
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| Political Constraints and Reform Strategy | |
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| The Politics of Reforms under Uncertainty | |
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| The Importance of Political Constraints | |
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| Ex Ante and Ex Post Political Constraints | |
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| Gradualism and the Interim Status Quo Bias | |
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| Aggregate Uncertainty | |
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| The Trade-offs between Big Bang and Gradualism | |
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| The Role of Complementarities and Reform Momentum | |
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| The Role of Reversal Costs | |
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| Optimal Sequencing | |
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| Sequencing of Reforms with Differences in Expected Outcome | |
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| Sequencing of Reforms with Differences in Riskiness | |
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| Sequencing of Reforms with Differences in Constituencies | |
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| The Possible Trade-off between Ex Ante Acceptability and Ex Post Irreversibility | |
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| Exogenous versus Endogenous "Reelection" or Future Support and Related Literature | |
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| Sequencing of Reforms in Transition Economies | |
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| Other Applications of Reform Sequencing: European Integration | |
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| Speed of Reform and Endogenous Investment | |
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| China: The M-Form versus U-Form Organization | |
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| Political Constraints without Uncertainty | |
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| Efficiency and Compensation of Losers from Reform | |
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| No Transfers and Majority Voting | |
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| Divide-and-Rule Tactics | |
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| Packaging Reforms to Gain Majority Support | |
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| Transfers and Asymmetric Information | |
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| Secession and Transfers | |
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| Other Models on Political Constraints and the Speed of Transition | |
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| Some Empirical Literature on Political Constraints | |
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| Alternative Approaches to the Political Economy of Reform | |
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| The Political Economy of Mass Privatization | |
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| Modeling a Possible Privatization Reversal | |
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| Privatization Reversal | |
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| Multiple Equilibria and Critical Mass in Privatization | |
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| The Political Effect of Giveaway Privatization | |
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| Giveaway to the Population or to Insiders | |
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| Thatcherian Underpricing | |
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| Empirical Evidence | |
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| The Economic Costs of Mass Privatization Programs | |
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| Conclusions for Part One | |
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| Allocative Changes | |
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| The Optimal Speed of Sectoral Reallocation | |
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| Labor Market Frictions | |
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| The Aghion-Blanchard Model | |
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| Endogenous Capital Accumulation | |
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| The Optimal Speed of Transition | |
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| Deviations from the Optimal Speed | |
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| Related Theoretical Literature | |
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| The Empirical Literature on Sectoral and Labor Reallocation | |
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| How Relevant Was the Optimal Speed Debate? | |
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| Speed and Methods of Price Liberalization | |
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| Pitfalls of Partial Liberalization | |
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| Dual-Track Price Liberalization | |
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| Efficient Supply and Rationing | |
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| Inefficient Supply and Rationing | |
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| The Plan Quantity Greater Than the Market Quantity | |
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| Efficiency and Pareto Improvement under the Dual Track | |
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| Enforcement of the Dual Track | |
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| The Dual Track and Corruption | |
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| The Dual Track beyond Transition | |
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| Evidence on the Resistance to Price Liberalization | |
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| Evidence on the Allocative Effects of Dual-Track Liberalization | |
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| Conclusion | |
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| Liberalization and the Output Fall | |
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| The Output Fall in Central and Eastern Europe | |
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| Explanations for the Output Fall | |
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| Disruption and Bargaining Inefficiency | |
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| Search Frictions and Specific Investment | |
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| The Initial Situation under Socialism | |
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| Conditions for an "All-Search" Equilibrium | |
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| Output Dynamics | |
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| Output Dynamics under Dual-Track Liberalization | |
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| Related literature | |
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| Empirical Analysis | |
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| Conclusion | |
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| Appendix | |
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| Government Collapse and Economic Performance | |
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| Introduction | |
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| Government Collapse or Law Enforcement | |
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| Mafia and Government Protection | |
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| Crime and Punishment ... and Taxes | |
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| Law Enforcement and Dualism | |
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| The EU Accession Effect | |
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| The Empirical Literature | |
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| The Unofficial Economy | |
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| Corruption | |
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| Private Contracting under Weak Law Enforcement | |
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| Conclusion for Part Two | |
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| Governance Changes | |
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| Solving the Incentive Problems Inherited from Socialism | |
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| Government Intervention in Firms | |
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| Government Control over Firms | |
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| Privatization | |
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| Trade-offs in Public and Private Provision of Public Goods | |
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| Control Rights and Information | |
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| The Ratchet Effect | |
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| The Ratchet Effect under Socialism | |
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| The Ratchet Effect and the Managerial Labor Market | |
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| The Soft Budget Constraint | |
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| The Basic Model of Soft Budget Constraints | |
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| The Soft Budget Constraint and the Ratchet Effect | |
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| The Lack of Innovation under Socialism | |
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| Soft Budget Constraints and Shortage | |
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| Soft Budget Constraints and Enterprise Autonomy | |
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| Hardening Budget Constraints and Privatization | |
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| Hardening Budget Constraints through Demonopolization | |
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| Some Empirical Literature | |
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| Comparing Policies of Privatization and Restructuring | |
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| The Different Approaches to Privatization | |
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| The Objectives of Privatization | |
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| The Constraints Facing Privatization Policies | |
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| Summarizing the Objectives and Constraints | |
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| Evaluating Different Privatization Policies | |
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| Models of Privatization | |
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| The Vested Interests of Insider Privatization | |
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| Better Incentives versus Softer Budget Constraints and Asset Stripping | |
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| Privatization with Noncash Bids and Ex Post Moral Hazard | |
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| Empirical Evidence | |
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| Incentives within Government Bureaucracy | |
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| Federalism and the Hardening of Budget Constraints | |
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| Soft Budget Constraints under Centralized Government | |
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| The Hardening Effect of Fiscal Decentralization | |
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| Partial Decentralization: Fiscal and Monetary Policy | |
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| Comparative Statics: SOEs versus TVEs | |
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| Empirical Evidence and Applications | |
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| Federalism and Yardstick Competition | |
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| Chinese Federalism versus Russia | |
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| Understanding Township and Village Enterprises | |
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| The Soft Budget Constraint and Financial Transition | |
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| Dealing with Soft Budget Constraints of Firms | |
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| Decentralized Banking | |
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| Trade Arrears and Restructuring with Redeployment | |
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| Entry | |
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| Changes in Screening Technology | |
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| Dealing with Soft Budget Constraints of Banks | |
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| Bank Passivity and Gambling for Resurrection | |
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| Rent Seeking by Banks | |
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| Incentives to Reveal Bad Debts | |
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| The Empirical Literature | |
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| Conclusion to Part Three | |
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| Synthesizing Lessons from Transition | |
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| What Have We Learned about Transition? | |
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| The Washington Consensus versus the Evolutionary-Institutionalist Perspective | |
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| A Broad Assessment | |
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| What Has Economics Learned from Transition? | |
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| References | |
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| Author Index | |
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| Subject Index | |