The paper deals with the impact of long-term persistent interregional disparities on the performance in transition to market economy. In the case of Poland, owing to the turbulent history, partitions and geopolitical displacements, the main institutions were shaped both by the country's traditions and various foreign impositions. First, it is shown that to a large extent, the substantial interregional discrepancies which widened in the 1990s can be traced back to a distant past. Second, we point out that those regions which inherited a higher overall economic development, superior physical infrastructure, and high endowment in social capital, have better performed on the way to market economy. Third, we advance the explanatory model of historical path dependence that includes both self-reinforcing and reactive historical sequences, and either homogenizing or diversifying external shocks. Finally, we argue that the social capital has been preserved in the form of community norms and customs.
Discusses the literature on the inter‐country differences in the pattern and magnitude of the transformation crisis in post‐socialist coutries. Describes and analyses the stylized facts regarding the transformational crises in these countries. Summarizes the main explanations for the crisis focusing on the institutional dysfunction‐induced output fall. Presents a model of the system‐switch output decline.
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