The Political Economy of Reforms: Empirical Evidence from Post-Communist Transition in the 1990s

Using a novel data set from post-communist countries in the 1990s, this paper examines the link-ages between political constraints, economic reforms and growth. Results from a dynamic panel analysis suggest that public support for reform is negatively associated with increases in income inequality and unemployment. In addition, both ex post and ex ante political constraints referring to the extent of public support affect progress in economic reforms, which in turn determines eco-nomic growth. These findings highlight that while economic reforms are needed to foster growth, they must be designed in such a way that they do not undermine political support for reform.