TY - JOUR AU - Aghion,Philippe AU - Blanchard,Olivier Jean TI - On the Speed of Transition Central Europe JF - National Bureau of Economic Research Working Paper Series VL - No. 4736 PY - 1994 Y2 - May 1994 UR - http://www.nber.org/papers/w4736 L1 - http://www.nber.org/papers/w4736.pdf N1 - Author contact info: Philippe Aghion Department of Economics Harvard University 1805 Cambridge St Cambridge, MA 02138 Tel: 617/495-6675 Fax: 617/495-4341 E-Mail: paghion@fas.harvard.edu Olivier J. Blanchard International Monetary Fund Economic Counsellor and Director Research Department 700 19th Street, NW Rm. 10-700 Washington DC, 20431 Tel: 202-623-7825 Fax: 202-623-7271 E-Mail: blanchar@mit.edu M1 - published as Philippe Aghion, Olivier J. Blanchard. "On the Speed of Transition in Central Europe," in Stanley Fischer and Julio J. Rotemberg, eds., "NBER Macroeconomics Annual 1994, Volume 9" MIT Press (1994) AB - Transition in Central Europe is four years old. State firms which dominated the economy are struggling with market forces. A new private sector quickly emerged and has taken hold. Unemployment, which did not exist, is high and still increasing. Will this process of transition accelerate, or slow down? Will unemployment keep increasing? Can things go wrong and how? Our paper represents a first pass at answering those questions. The basic structure of the model we develop is standard, that of the transition from a low to a high productivity sector. But we pay attention to two aspects which strike us as important. The first is the interactions between unemployment and the decisions of both state and private firms. The second are the idiosyncracies which come from the central planning legacy, from the structure of control within state firms to the lack of many market institutions, which limits private sector growth. We start with a description of transition in Poland so far. We then develop a model and use it to think about the determinants of the speed of transition and the level of unemployment. Finally, we return to the role of policy and the future in Poland, as well as the causes of cross-Central European country variations. ER -