privatization in eastern germany management selection and economic transition this paper suggests that management s role in enterprise restructuring and market failures in the managerial labor market help explain important features of the german privatization program a model of adverse selection based on information advantages for private owners demonstrates how privatization can improve the quality and number of western managers in eastern enterprises these benefits can increase with the size of the transition evidence of management replacement and significant differences between state owned and privatized firms from a survey of eastern german firms supports model assumptions and predictions these results suggest the importance of management replacement to successful privatization copyright 1997 by american economic association

can a liberalization of capital outflows increase net capital inflows abstract facing massive capital inflows that put downward pressure on the real exchange rate some policymakers and analysts have recommended a liberalization of capital outflows empirically however the removal of capital outflow controls has apparently stimulated a net inflow of capital in several experiences such as britain since 1979 italy new zealand and spain in the mid to late 1980s and colombia egypt and mexico in the 1990s numerous measures to liberalize capital outflows in chile during the 1990s have not had a noticeable effect in offseting a surge of net capital inflows how can we explain the apparent paradox that reducing controls on capital outflows can actually increase net capital inflows our theoretical model provides one such explanation a liberalization of capital outflows understood here as a reduction in the minimum capital repatriation period for foreign investment reduces the degree of irreversibility of the decision to invest in a given country this in turn lowers the option value of waiting until uncertainty about a possible change in the rules of the game that affect investment in domestic assets is resolved because in this event foreigners investing at home will be stuck with the low return asset for a shorter period of time thus a reduction in the minimum repatriation period is likely to increase not decrease net capital inflows this result has an important policy implication liberalizing capital outflows may have significant benefits on its own but it may not be the appropriate policy to defend the real exchange rate in the presence of massive capital inflows because it is likely to strengthen those very capital inflows

wealth as a criterion for sustainable development in this article the authors define sustainable development as an economic programme along which social well being does not decline over time it can be shown that the requirement is equivalent to the maintenance of a comprehensive measure of wealth where an economy s wealth is defined to be the social worth of its entire array of capital assets including natural capital using data published by the world bank on the world s poorest regions countries which would be regarded as having performed well if judged on the basis of such indices as gnp per head or the human development index are found to have grown poorer a few alarmingly so

exports inflation and growth abstract this article seeks to identify some of the main determinants of exports and economic growth in cross sectional data from the world bank covering 160 countries for 1985 94 first the linkages between the propensity to export and population per capita income agriculture primary exports and inflation are studied by statistical methods then the relationship between economic growth and some of the above mentioned determinants of exports as well as investment are scrutinized the same way the main conclusion is that in the period under review high inflation and an abundance of natural resources tended to be associated with low exports and slow growth

economists and the welfare state abstract this paper constrasts the views of the welfare state of economists in the 1940s and 1950s with those of the current generation it is argued that economists as a profession in particular in the scandinavian countries have changed from being strong spokesmen for the welfare state to becoming much more critical the reasons for this are sought both in the expansion of the public sector in recent decades and in the development of economic theory in the areas of public finance insurance and incentives and public choice an attempt is made to evaluate the importance of the empirical and theoretical developments for the changing views of the welfare state

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

large scale privatization in transition economies to explain the slow progress of mass privatization programs in eastern europe the authors present a model based on a positive spillover between aggregate privatization and the individual expected return to privatization derived from a potential populist backlash if costly reforms do not bring forth sufficient aggregate privatization the model allows for the simultaneous existence of a pessimistic zero privatization trap and an optimistic full privatization equilibrium defined by a critical mass of expected privatization while both privatization subsidies and minimum income guarantees can by themselves secure coordination on the optimistic equilibrium the financing constraint may offset the direct effect copyright 1993 by american economic association

economists and public policy chicago political economy versus conventional views both conventional welfare economics and public choice analysis suggest that economists have an important educational role to play in the public policy process in improving the decision making process in sharp contrast information and incentive problems related to voting rules the bureaucracy and the legislature do not arise in cpe because these processes are all perfect agents of interest groups consequently the political process is efficient and there is no scope for beneficial economic analysis as it relates to the sugar program or other public policies that is the polity is efficient or it would be reordered by competing interest groups to make it so but as mitchell 1989 290 stresses the important unanswered question in cpe remains if there is no scope for improvement how and why does change occur

james m buchanan s contributions to economics this survey of james m buchanan s contributions to economics is divided into eig ht main categories the influence of knut wicksell and the pure theory of govern ment finance the italian tradition and the burden of national debt the calculu s of consent application of the public choice approach application to public f inance public goods and clubs fiscal constitutions and the reason of rules a bibliography of buchanan s publications 1949 to 1986 concludes the survey copyright 1987 by the editors of the scandinavian journal of economics

privatization market liberalization and learning in transition economies privatization and market liberalization are widely considered to be complementary reforms in transition economies this article challenges this view and the closely related big bang approach when pursued too vigorously privatization may impede the transition process following liberalization our result is based on an explicit model of market learning compared to a mature market a market in transition is characterized by greater uncertainty regarding market conditions including equilibrium prices and quanti ties economic actors must learn about these conditions through their participation in the market process less than full privatization is optimal if the costs of learning are sufficiently important

privatization technology choice and aggregate outcomes abstract we analyze the macroeconomic consequences of privatization policies in transition economies due to the particular market structure in those economies strategic completnentarities in restructuring of privatized firms occur giving rise to multiple macroeconomic equilibria restructuring and the resulting macroeconomic outcomes crucially depend on how property rights are distributed and which method of privatization is chesen firm sales to single or core investors may easily lead to bad equilibria without restructuring if employees are given profit claims this is so even if the workers give up parts of their wages as a compensation for stocks wage equity swaps contrary to conventional wisdom mass privatization can have favourable influence on micro economic efficiency and may therefore lead to a good aggregate outcome as an additional feature favouring mass privatization we argue that a big bang approach to privatization might lead to a favourable equilibrium

available capital utilized capital and shadow prices in inclusive wealth accounting abstract previously accounting for comprehensive or inclusive wealth has focused on the supply side of capital assets however human well being created by capital assets inherently depends on the demand side as well in particular if capital is not utilized at its full capacity then realized or actual human well being may be less affected by available capital than by effective or utilized capital in principle this notion is embodied in a shadow price which is defined as the marginal contribution of capital assets to social well being the shadow price becomes higher if the underlying resource allocation mechanism improves in practice one can account for such underutilization by adjusting shadow prices to reflect only the utilized quantity of the capital in question furthermore capital utilization has different nuanced implications for produced human and natural capital and its implications even vary across some classes of natural capital within this line of theoretical thought we provide empirical estimates of the changes in inclusive wealth and sustainability of selected developing countries in recent years by comparing available and utilized capital assets we find that sustainability assessments may be revised based on utilized capital due to among others human capital underemployment and non renewable natural capital accessibility

public versus regulated private enterprise a comparison of public enterprise with regulated private enterprise shows that the efficiencies of privatization stem from the insulation it brings from arbitrary political and self serving influences the critical insulation springs from the costliness of interventions when there is a regulatory compact in place that protects private property from expropriation while it also corrects for market failures that same insulation means that public enteprise is a better form of organization for activities that call for a response to public interest exigencies which cannot be specified in advance or reliably adjudicated after the fact the analysis emphasizes that an appropriate regulatory compact requires institutional support international organizations that seek to implement privatization should consider promoting credible regulatory commitment by requiring countries to execute explicit regulatory compacts and by bringing to bear the weight of their continuing relationship as a means of motivating the countries to conform to such strictures

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

privatization under political interference evidence from eastern germany abstract can privatization authority be successfully delegated to a privatization agency to address this question we examine the liquidation policy of the german privatization agency the theoretical part develops a dynamic model of optimal liquidation under incomplete political insulation of the privatization agency we explore how external political interference affects its liquidation policy and derive testable implications for the distribution of liquidation decisions and privatization prices the empirical part uses micro data on 1804 privatization contracts and 1097 liquidation decisions to verify the model predictions the data confirm the view that political liquidation constraints are an important determinant of privatization outcomes

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

trade reform aggregate investment and capital flight on credibility and the value of information abstract in this paper we demonstrate that uncertainty about future policy reversals coupled with irreversible investment confers an option value to foreign exchange and may lead to capital flight and a fall in aggregate investment after a trade reform the analysis focuses on the value of information and the credibility of the policy reform the conclusion points to a potential role for international institutions to prevent such problems

markets and states against minimalism abstract this paper argues against the currently fashionable case for state minimalism or laissez faire it not only argues for a strong state but also for an activist one though operating on a different basis from the many recently failed interventionist states the argument is developed via a critique of a series of overstated or one sided propositions that bolster the state minimalist position these include the notion of price distortions of inherently inefficient public enterprise of an unambiguous dividing line between the public and the private sectors and of statism as inherently rent seeking the paper seeks to rescue alternative perspectives from outside neoclassical political economy approach such as the importance of civil society and the need for a nonmaximizing theory of the state successful liberalization programs may require more intervention of a different kind at least for a transitional period a broad view of democracy is required allowing the possibility of state action guided by motives of public interest

distributional constraints on the speed of privatization abstract this paper argues that adverse distributional effects may prevent speedy privatization in former command economies an imbalanced structure of the work force combined with a politically motivated subsistence consumption constraint may necessitate gradual privatization this possibility is illustrated by a numerical example and a model of gradual privatization is suggested

evaluating projects and assessing sustainable development in imperfect economies we are interested in three related questions 1 how should accounting prices be estimated 2 how should we evaluate policy change in an imperfect economy 3 how can we check whether intergenerational well being will be sustained along a projected economic programme we do not presume that the economy is convex nor do we assume that the government optimizes on behalf of its citizens we show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained we also show that a comprehensive measure of wealth computed in terms of the accounting prices can be used as an index for problems 2 and 3 above the remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources transacted in a few well known economic institutions

hungary s transition to the market the case against a big bang hungary paul hare and tamas revesz among eastern european countries hungary s great advantage is that it began economic reforms in 1968 and slowly introduced the institutions of a market economy during the 1980s these measures laid the foundation for a gradual transition to the market without the need for any sharp break with the past policy mistakes were of course made the most serious extending over several years was the 1970s investment boom funded by foreign capital which contributed to hungary s large debt burden despite this the government accounts are not now in substantial deficit and the balance of payments on current account is in modest surplus nevertheless managing the external debt is now the most difficult of hungary s problems it is important that hungarian joint ventures and privatization are now attracting significant quantities of foreign capital given the quite rapid pace of liberalization since the late 1980s the government s commitment to further changes and a reasonably satisfactory macroeconomic balance though inflation is worrying there is no case for a big bang approach in hungary such a shock could only disrupt established market relationships and expectations with little benefit the most valuable forms of aid for hungary would be debt relief and unrestricted access for hungary s products to ec markets

characteristics of privatization evidence from developed less developed and former communist countries a privatization wave has swept the world starting in the u k in the early 1980s and then progressing to other developed and less developed nations this study examines how the country characteristics for the formerly state owned enterprises relate to the nature of the privatization deal and the strategy of the acquiring firm in particular this paper examines how country characteristics affect government privatization policies and in turn firm strategy results indicate that there are differences with respect to the characteristics of privatization and government policies that translate into differences in firm strategy in former communist less developed and developed countries

wealth natural capital and sustainable development contrasting examples from botswana and namibia theoretical work has demonstrated that sustainable development requires non declining per capita wealth where wealth is defined to include produced natural human and social capital several studies have attempted to measure total national wealth or changes in wealth but have been seriously hampered by a lack of data especially for natural and human capital to address this problem the un and other international statistical agencies developed a standardized framework for environmental accounts the system of integrated environmental and economic accounts seea using the newly available asset accounts for natural capital national wealth accounts are constructed and used to assess the contrasting development paths of botswana and namibia botswana with an explicit policy of reinvestment of resource rents has roughly tripled per capita wealth and national income over the past two decades namibia with no explicit policy to use natural capita to build wealth has seen per capita wealth and income decline

global corporations and local politics income redistribution vs fdi subsidies abstract income inequality has been used empirically to explain the mixed performance of developing countries in attracting fdi this paper sets up a theoretical model that links the skewness of the income distribution to a host government s willingness to subsidize fdi large skewness makes government subsidies less likely because the median income person prefers redistribution little skewness however does not guarantee fdi in addition host governments may switch from positive to no subsidies if a shift in economic variables changes how the policymaker trades off the fdi benefits and income redistribution thereby offering an alternative to the conventional hold up story

capital repartriation and the waiting game abstract a stylized fact on post stabilization economies is that getting the fundamentals right even though necessary is not sufficient to ensure a prompt and costless resumption of growth uncertainty whether stabilization can in fact be sustained confers an option value to postponing investment in domestic real assets

choices and the value of natural capital sustainability requires maintaining opportunities for future generations so they can meet their needs opportunities are passed to future generations through a set of capital assets nature provides an important class of these assets but markets seldom reveal the marginal value of natural capital rather the marginal social worth or asset price must be imputed based on intertemporal exchange in the context of assessing whether intertemporal allocation rules lead to sustainable development appropriate asset prices must be based on the actual allocations and trade offs society makes therefore measuring economic programmes that enable the measurement of asset prices is an important empirical task we review the theory of measuring natural capital asset prices and discuss the key elements of measuring economic programmes that enable the measurement of natural capital asset prices we place the measurement of economic programmes and natural capital asset prices in the context of wealth based sustainability metrics