Factors relating to the divergence in success of economic liberalisation of formerly communist Eastern European countries (1990-2015)

Abstract

Liberalisation has been a key word for economic improvement since the 1970s, however it is not the only time liberalisation has taken place. Additionally, it has not always proven effective at solving a nation’s economic ills. To find out what factors determine the success of economic liberalization, this research performs a series of regressions on several factors, across multiple countries in Eastern Europe. It determines success by looking at GDP (per capita, PPP), unemployment, net migration, and the suicide rate. Three hypotheses are used to guide research, based on explanations most commonly used in the debate surrounding the explanation of the divergent results of liberalisation in Eastern Europe. These hypotheses revolve around preconditions, policy, or international factors being the primary explanatory factors. Statistics from the World Bank and IMF are used as primary sources for data, with the great volume of previous studies of smaller scale or breadth providing secondary sources and historical context. The historical analysis of the data and context provides explanations for each of the dependent variables by comparing countries that performed well with those that did not in relation to the dependent variable in question. The study concludes that for GDP per capita PPP policy, factors influencing policy, and EU membership carry the most explanatory weight. For divergence in the unemployment rate policy is again the primary explanator, influencing the unemployment rate’s reaction to the general growth of the economy, though preconditions factor into how much the rate could grow or be reduced. Divergence in the suicide rate is linked to social shocks, which are in part linked to preconditions and policy, but also general economic shocks. More research must be done on the influence of social factors on the suicide rate however. More research also is required on social, and perhaps legal factors regarding the divergence of net migration, as this study does not manage to reach substantial conclusions from investigating it.