The Sequencing of Reform in Transition Economies

In this paper, we examine the consequences of sequencing on the progress of reforms in transition economies. The paper uses panel logit models to determine whether or not progress in some reforms enhances the prospects for other reforms. We find that progress on small-scale privatization is associated with advances in several other reforms, perhaps because small-scale privatization creates lobbies for reform. Our estimations suggest that a comprehensive program of small-scale privatization is needed to stimulate large-scale privatization, trade, and banking reform in a country that has undertaken little reform. Moreover, if restructuring is to occur banking reform is necessary. We also find that relaxing the fiscal constraint stimulates large-scale privatization, restructuring, and trade reform. Finally, we find that negotiations about EU accession negotiations advance the transition but only in banking reform and competition policy