Notes

1. Market liberalization reforms in our framework are distinctly different from price liberalization, actions taken by the government to bring the relative input and output price of the domestic economy into closer alignment with international relative prices, which are assumed to reflect the long-run scarcity value of the goods. Pricing reform policies, as we note below, primarily affect allocat-ive efficiency. We recognize, however, that in reality, the reform policies that affect the operation of input supply chains and output marketing channels often also affect relative prices, and are in this sense affecting both technical and allocative efficiency.

2. As explained above, 'market liberalization', as defined in Section 3.2, has similar effects to 'property rights reform'.

3. Alternatively, Country 1 could move from point A to C to D and Country 2 could move from point B to F to D. If the policies are implemented and become effective simultaneously, the order of movement is purely arbitrary.

4. Comparing the results of Russia and the Czech Republic shows that output fell much further in Russia than in the Czech Republic. Our model offers several hypotheses for this. One possible cause is that the decline in terms of trade was larger in Russia (-73% compared to -50%) Another possible reason is that although in both Russia and the Czech Republic there was considerable disruption that may have obscured gains from property rights reform, it is well known that progress in property rights reform occurred more rapidly in the Czech Republic than in Russia. If so, this means that during the first five-year period, the upward rise in the production function for the Czech Republic should have been greater than that of Russia (which was arguably zero, since few property rights reforms were implemented rigorously). Hence, one should be careful about assigning causality on the basis of such simple data (see next chapter for a more careful analysis with data for more years from more countries); the fact that both fertilizer use and output fell less in the Czech Republic than in Russia also suggests that the data are consistent with the predictions of the model.

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