We developed a model for the transition from socialism to capitalism 7 years ago. It described the evolution of real GDP per capita in a parsimonious way. The original model had three defining parameters empirically estimated for a number of former socialist countries. These parameters are:
αs - the exponent related to the disintegration of the socialist system, which included both depopulation and the free fall in real GDP per capita;
αc – the growth rate of the number of people in the capitalist part of the overall system during the transition;
α – the rate of endogenous growth of the capitalist subsystem.
Almost all countries have already passed the transition and their populations are fully in the capitalist mode of production. There are few poor examples, however. Tajikistan had an estimated exponent of real GDP per capita growth only 0.5 percent per year and Kyrgyzstan was even worse – 0.0 percent per year. Two figures below show that our model still works accurately. Unfortunately.
The problem is in very slow conversion of their populations into the capitalist system. At the same time, the rate of socialism distraction was very high and a very big portion of the populations is still out of both systems.
Figure. Observed and predicted evolution of real GDP per capita in Tajikistan and Kyrgyzstan both normalized to their levels in 1991.
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