ABSTRACT
At the onset of transition, the republics of former Yugoslavia shared a common institutional framework based on decentralized market socialism, which differed fundamentally from Albania’s highly centralized version of a socialist planned economy. While managers and workers in former Yugoslavia had experience of markets, Albanian managers and workers had no prior experience of the market economy, and consequently their adjustment to the shock of transition was more difficult. The institutions that supported the transition were also more advanced in the former Yugoslavia than in Albania. Variations in such initial conditions were important determinants of differences in response to the opportunities that were opened up by institutional reform, and therefore in the pace of economic growth.
