A Comparative Analysis of Productivity Growth, Catch-Up, and Convergence in Transition Economies

Abstract

The paper examines the macroeconomic performance of 25 transition economies using a comparable dataset. In order to see whether the transition to the market based economy increased economic efficiency, technical progress, and total factor productivity, we estimate efficiency measures for the East European, Baltic, and other former Soviet Union Countries using the stochastic frontier analysis (SFA) and the data envelopment analysis (DEA) as a confirmatory analysis. According to the SFA estimates, the average annual efficiency level for the 25 transition economies is 0.548 and the average annual rate of growth in technical efficiency is 1.8 percent over the 1991-2000 period. The average annual technical change in transition economies is -4.3 percent over the period examined. That is, there is no technological progress, but over the whole period there has been a technological regress. The sum of the rate of change in technical efficiency and technical change implies a 2.5 percent decline in the average annual total factor productivity. These results suggest that, on average, chance in technical efficiency is outweighed by the technical regress.