Abstract

http://ssrn.com/abstract=636182
 
 

References (35)



 
 

Citations (7)



 


 



A Decade of Fiscal Transition


Asad Alam


World Bank

Mark W. Sundberg


The World Bank

April 26, 2002

World Bank Policy Research Working Paper No. 2835

Abstract:     
Transition literature has emphasized stabilization and enterprise restructuring. Both cross-country analyses and country-specific studies have tended to focus on fiscal stabilization and its indicators, highlighting the importance of quantitative fiscal adjustment to stabilization outcomes. Less attention has been paid to the qualitative dimensions of fiscal adjustment in transition.

Alam and Sundberg take stock of the extent to which fiscal adjustment has occurred during the first decade of transition in both qualitative and quantitative dimensions. They define quality as the extent to which: (1) pro-growth expenditure essential for creating future economic and social assets are maintained; (2) pro-poor expenditure, such as poverty-targeted transfers, necessary to ensure income for the poor and vulnerable are adequately provided; and (3) fiscal risks, impinging on both expenditure and revenue, are managed through transition.

The authors conclude that while the quantitative magnitude of the fiscal adjustment was dramatic, the quality of this adjustment has compromised the social and economic objectives of transition, particularly in the Commonwealth of Independent States (CIS). They draw four main conclusions:

- Investments in public services fell in both absolute and relative terms.
- Reduced spending on government transfers contributed to a sharp increase in income inequality in the CIS.
- Fiscal risks increased during the transition.
- Initial conditions allowed Central European and Baltic countries to maintain higher expenditures, which may have contributed to their faster economic recovery and political support for the reforms.

The authors argue that the challenge today for fiscal policy in these countries is to facilitate the transition - particularly in reallocating resources from large state-owned enterprises to new small and medium-size firms, and providing priority public services and targeted transfers to assist those adversely affected by transition and reverse the deterioration in social outcomes. The interplay between fiscal policies and institutional arrangements is increasingly important as transition economies embark on their second decade of reforms. In particular, incentives embedded in the institutional arrangements for fiscal management needs to be strengthened so that policies, resources, and outcomes can be better aligned, and the fiscal adjustment is consistent with qualitative considerations.

This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - is part of a larger effort in the region to understand economic transition in former centrally planned economies.

Number of Pages in PDF File: 29

working papers series





Download This Paper

Date posted: December 27, 2004  

Suggested Citation

Alam, Asad and Sundberg, Mark W., A Decade of Fiscal Transition (April 26, 2002). World Bank Policy Research Working Paper No. 2835. Available at SSRN: http://ssrn.com/abstract=636182

Contact Information

Asad Alam (Contact Author)
World Bank ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
Mark W. Sundberg
The World Bank ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
Feedback to SSRN


Paper statistics
Abstract Views: 804
Downloads: 109
Download Rank: 149,985
References:  35
Citations:  7

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.297 seconds