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convergence in policies and institutions will generate catch-up growth and thus convergence in productivity and living standards.

The Business Environment and Enterprise Performance Surveys (BEEPS) implemented in the transition economies by EBRD and the World Bank are part of this research effort. The BEEPS surveys, and the similarly-motivated Investment Climate Surveys (ICS), are large-scale surveys of firms that have been implemented in many countries since the late 1990s. In addition to standard questions about the characteristics and performance of the firms, the surveys have a strong focus on the economic and business environment in which managers have to operate. There have been many studies to date using the BEEPS and ICS data. Some of these studies have focused on direct measurement and characterization of various aspects of the business environment (e.g., the effectiveness government, corruption, the legal system, business infrastructure); Kaufman, Hellman, Jones and Schankerman (2000) and World Bank (2006) are examples. Others have tried to estimate econometrically the relationship between aspects of the business environment and productivity at the firm level (e.g., Dollar, Hallward-Dreimeier and Mengistae 2005, Svejnar and Commander 2007, Carlin, Schaffer and Seabright 2006).

Our paper is a contribution to this literature: we use the waves of BEEPS data to analyze the convergence process in the transition economies. The BEEPS consist of a series of 3 snapshots of virtually all transition economies in 1999, 2002 and 2005, plus, crucially, selected developed market economies in 2004-05. The BEEPS has a number of useful features for our analysis:

  • The surveys are random and representative samples that cover all TEs, allowing ready identification of broad patterns.

  • The first year of the BEEPS surveys is 1999, and it happens also to be the first post-financial crisis year, when the transformational recession is more or less over, and growth starts across the region. We are able to analyze 6 years of change, convergence and growth.


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