Deindustrialisation and Structural Change During the Post-Communist Transition

Abstract

The aim of this paper is to model the evolution of employment structure in post-communist economies in the broader context of deindustrialisation. The paper builds on the model of structural change developed by Rowthorn and Wells (1987). We show that the starting point of high industry sector share in total employment and its direct fall when productivity of sectors changes in favour of services can be explained in terms of this framework. Moreover, the model can also describe the phenomenon of a further expansion of the agriculture, observed in countries classified as less consistent in the reforms implementation. Hence, we distinguish two development paths, the efficient one, called horizontal, and the inefficient one called vertical. We illustrate it with empirical data, using alternative measures of structural change and patterns of structural evolutions during transition. Finally, we discuss the link between the EBRD indicators of reforms and structural change. We show that the quality of reforms, not the initial GDP level determines a country's development path.