The s(t)igmas of transition: can reallocation (of labor and capital) explain the output fall? CERGE-EI discussion paper series 2000-52.

Abstract

A standard framework to understand the transition is a two-sector closed-economy model in which a representative state sector firm maximizes insiders' utility subject to a zero profit constraint while its private sector counterpart maximizes profits. The objective of this papers is to enrich this framework by adding two important features.