We evaluate the effect of the 1989 shock over economic development in four Eastern European countries. We apply a counterfactual approach and define the shock alternatively as the trigger for economic openness, political competition, or both. The main result is an effect of economic freedom larger than the one of democratization. In Poland and Bulgaria we find a positive impact of economic freedom, while in Bulgaria there is also a smaller effect of democratization. In Albania, after an initial recession, economic freedom helps recovery. Finally, Romania does not show any robust effect
Synthetic ‘Real Socialism’: A Counterfactual Analysis of Political and Economic Liberalizations
Petrarca, Ilaria;Ricciuti, Roberto
2015-01-01
Abstract
We evaluate the effect of the 1989 shock over economic development in four Eastern European countries. We apply a counterfactual approach and define the shock alternatively as the trigger for economic openness, political competition, or both. The main result is an effect of economic freedom larger than the one of democratization. In Poland and Bulgaria we find a positive impact of economic freedom, while in Bulgaria there is also a smaller effect of democratization. In Albania, after an initial recession, economic freedom helps recovery. Finally, Romania does not show any robust effect
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