Social Cohesion and Transition Dynamics

This chapter investigates whether the conventional trade-off between equality and efficiency can also be assumed in the case of economies in transition from a socialist system towards a market economy. This issue, which is normally subject of debate in development economics, is discussed in the context of creative destruction as the general condition of development in central east Europe. After a period of devaluation of the capital stocks, these countries are now in a growth period of capital accumulation. In this situation the Okun assumption1 can be re-phrased as the question of how much inequality is needed for dynamism, or vice versa, how much inequality is sustainable against the background of social cohesion within the society.