He has highlighted in this article, that 60 % of the difference in economic performance of the respective countries he has studied including Hungary and Poland is due to uneven initial conditions such as level of development in the transition economies and pre-transition industrial structure and trade patterns.
He has also found in his research that after controlling for these initial factors, the impact of liberalization becomes insignificant. As well, he has pointed these variations in inflation rates and institutional capacities as measured by the percentage of government expenditure to gross domestic product and by the ratio of rue of law to democracy index is a crucial cause of economic performance of these transition economies. According to the research of Popov's article, the non-policy factors of initial conditions as discussed above and the institutional factors account for 85% of differences in Gross domestic product change in the 28 countries or transition economies he has studied including Hungary and Poland.
Basing on the above research article it is certain the transition theory of shock therapy and gradualism even though it plays a role it can be argued it is a secondary issue compared to the distortions created and inherited by these countries from the planned economic system.
It highlights the crucial importance of institutional factors to be considered to transform the economy to a market system and improve economic performance in a macroeconomic sense.
The research finding of the above paper also highlights to some extent the complexity and the importance of having the correct institutional reform and appropriate macroeconomic policy. As well, creating and building the market conditions such as business law and corporate governance issues and democratization of the political process. In addition, based on this paper it is certain it shed light the importance of building independent regulatory institutions and microeconomic reform so that the liberalization and privatizations can become more successful. In this dynamic, it can create a viable private sector in these countries to become a successful market economy.
It is also obvious that the institutional factor and institutional building in these transition economies must be undertaken in an evolutionary manner given the internal conditions of each country. It is also evident, that the process of institutional building and reform must not be unnecessarily radical and if it is radically excessive it may be countering productive and the transition dynamics may be ineffective. As well, the reform of the institutions must be more extensive and must be systematically implemented.
As discussed above by critically examining the Popov's academic article it can be argued that to transform from a centrally planned economy to a market economy is a complex process and different strategies and transitional processes work in different situations given the initial situation in terms of economic, political and social factors. It also highlights the crucial importance irrespective of these transitional countries to conduct institutional reform. This must take place at an appropriate phase to transform these transition economies from centrally planned economy to a dynamic competitive market economy close to a western style market economy. The time it takes to transform also varies from one country to another depending on the countries capacity and acceptance of these reforms by the constituents.
It is certain the speed of change is a secondary factor from the above research findings compared to the institutional factors and its evolutionary change over time than rapid change in all the countries irrespective of their own initial internal conditions in terms of economic structure, level of private sector, political factors, and entrepreneurship.
