Expectations, authority and divergent market transitions

Bibliographic Data

ID6460699
AuthorsSusanne A Wengle (0000-0003-1256-3161), Daniele Girardi (0000-0002-3423-3174), Roberto Veneziani (0000-0001-6431-0145)
Year2025
Volume196
Pages107105-107105
Publication date2025-08-14
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueWorld Development (JOURNAL)
Journal identifiersISSN: 0305-750X • E-ISSN: 1873-5991
PublisherElsevier BV (PUBLISHER)
DOI10.1016/j.worlddev.2025.107105
OpenAlexW4413114476
LanguageEN
References cited53

Over 35 countries have embarked on transitions from planned to market economies over the last forty years, with widely divergent outcomes and momentous political, institutional, and economic consequences. We argue that social expectations played a critical but underappreciated role in shaping transition outcomes. We present a formal model of market transition as an assurance game with two possible self-enforcing equilibria, economic collapse or sustained growth. We then adduce evidence from available historical surveys that confirms that enterprise managers' expectations differed widely and correlated with transition outcomes as predicted by the model. Our main point of departure from extant institutionalist scholarship on market transitions is our emphasis on expectations and their interaction with economic institutions. Instead of treating institutional strength as an exogenous factor that determines outcomes directly, we draw attention to the catalytic effect of expectations at the outset of transition, a moment of exceptional institutional fluidity and uncertainty

Economic geography · Economic system · Economics · Market economy · Political economy · Political science · Corruption and Economic Development · Culture, Economy, and Development Studies · Taxation and Compliance Studies

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