The Devolution of Centrally Planned Economies

Peter Murrell and Mancur Olson , Journal of Comparative Economics 15(2) , 239-265 , June 1991.

Estimates of the opportunity for catch-up growth reveal that the centrally planned economies performed relatively well in the early postwar period, but that their performance compared to that of the market economies deteriorated over time. The theory of encompassing interests explains why the gains to a dictator from a more productive domain can initially lead to rapid growth. Yet as time goes on, groups of subordinates overcome the difficulties of collective action and collude, especially by restricting the information given to the center. This collusion generates an institutional sclerosis that is even more pronounced than that observed in market economies.

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