The political economy of trade liberalization in the transition

Baldwin and Baldwin (1996) review explanations for trade liberalization in developed market economies. In particular, exchange of market access appears important (Hillman and Moser, 1996). For economies in transition, technological inferiority and contemporaneous privatization distinctly form part of the scenario for trade liberalization and are basic ingredients in a model describing liberalization policies. We begin here with background observations and proceed to a model which ties together politically-constrained trade-liberalization opportunities and privatization of technologically disadvantaged enterprises. The model draws on a more extensive presentation in Hillman et al. (1996).