radicalism versus gradualism an analytical survey of the transition strategy debate academic debate on a transition strategy for former socialist economies continues even a quarter century after the collapse of the communism in central and eastern europe and the former soviet union in this paper through an analytical survey of 137 preceding studies we present an overall picture of the debate and examine the relationship between the debate attitudes and the literature attributes in related studies we found that the radicalists maintain a consistent debate attitude from the viewpoints of time speed and policy sequence of economic transition while the debate attitude of the gradualists is more diversified we also found that there is another group of researchers that stays within the framework of the radicalism versus gradualism debate while at the same time keeping at arm s length from both the radicalists and the gradualists in addition our regression estimation of qualitative selection models provides interesting findings on the relationship between the debate attitudes and the literature attributes

patterns of agrarian transition karen macoursuniversity of california berkeley and katholieke universiteit leuvenjohan f m swinneneuropean commission and katholieke universiteit leuveni introductioneconomic reforms have induced important output and productivity changesin the agricultural sectors of transition countries tcs there are however large differences between the countries in terms of the direction and themagnitude of these changes for example agricultural output increased con siderably in the east asian tcs while there was a large output fall in thecentral and east european countries ceecs and the former soviet union fsu during transition g 1

structural factors in the economic reforms of china eastern europe and the former soviet union reform in china and russia jeffrey sachs and wing thye woo china s experience does not show that gradual reform is superior to the shock therapy undertaken in eastern europe and the former soviet union eefsu differing performance primarily reflects different economic structures prior to reform china was a peasant agricultural society eefsu was urban and overindustrialized in both jobs in state enterprises were so heavily subsidized that workers refused to move to new industries elsewhere even when productivity in the latter was much higher in eefsu the large state sector impeded structural adjustment curtailing subsidies would have produced many losers who used their power to resist this outcome failure to curtail subsidies then cut off the potential supply of labour and other factors to new emerging firms china s state enterprises have not performed as well as the rest of the chinese economy and do not explain its success rapid growth was possible because the large agricultural sector contained vast surplus labour and did not enjoy subsidies and soft budget constraints once constraints on migration across regions and jobs were removed this labour was available to fuel expansion in new industries unlike the distributional conflict in eefsu in china reallocation of labour allowed all groups to gain in both partial liberalization also unleashed macroeconomic pressures manageable in china because of rapid growth and adequate monetary policy but explosive in much of eefsu because of deeper structural problems and gross monetary mismanagement

reform strategies and economic performance of russia s regions abstract the paper examines major nonpolicy and policy factors that account for the varying patterns of change of output and incomes in russia s regions it is found that initial conditions resource advantages and institutional capacity has had considerable impact on performance but there is no evidence that economic reforms has led to better output and investment dynamics in contrast for interpreting regional differences in per capita income change reform progress controlling for federal regional financial transfers is an important explanatory variable thus the major impact of reforms has not been to boost output and investment but to redirect incomes into pro reform regions

capital flows in the euro area and target2 balances abstract this paper explores how the uneven recourse by national banking systems in the euro area to the ecb s unconventional refinancing operations that led to the accumulation of large target2 balances at the ncbs has contributed to the evolution of aggregate economic activity in important member states of the euro area for the period between 2008 and 2014 we estimate a panel var model and identify the structural shocks by means of sign restrictions our results suggest that the build up of target2 balances was driven mainly by capital flow shocks while being barely responsive to other aggregate shocks furthermore on the basis of counterfactual experiments we find that the ability to build up sizeable target2 liabilities has contributed substantially to avoiding deeper recessions in the distressed euro area member countries like spain italy ireland and portugal while to a smaller extent depressing aggregate economic activity in core member states such as germany the netherlands and finland

mass privatization state capacity and economic growth in post communist countries why did the transition from socialism to capitalism result in improved growth in some countries and significant economic decline in others scholars have advanced three main arguments 1 successful countries rapidly implemented neoliberal policies 2 failures were not due to poli cies but to poor institutional environments and 3 policies were counterproductive because they damaged the state we present a state centered theory and empirically demonstrate for the first time one of several possible mechanisms linking neoliberal policies to poor economic performance mass privatization programs where implemented created a massive fiscal shock for post communist governments thereby undermining the development of private sector gover nance institutions and severely exacerbating the transformational recession we performed cross national panel regressions for a sample of 25 post communist countries between 1990 and 2000 and found that mass privatization programs negatively affected economic growth state capacity and property rights protection we further tested these findings with firm level data from a rep resentative survey of managers in 3 550 companies operating in 24 post communist countries within countries that implemented mass privatized programs newly privatized firms were sub stantially less likely to engage in industrial restructuring but considerably more likely to use bar ter and accumulate tax arrears than their state owned counterparts

measuring noise in inventory models this paper has two purposes one is to assess different models of inventory behavior in terms of their ability to approximate the realized data we do this initially for the pure production smoothing model and then for a sequence of generalizations our analysis both performs specification tests as well as measures the deviations of the data from each null model through use of a noise ratio statistic a second purpose is to explore whether observed cost shocks in particular raw materials prices help explain inventory movements we find that the production smoothing model of inventories augmented by buffer stock motives stockout avoidance motives and observed cost shocks well approximates monthly data

is education important in assessing the impact of institutions on economic growth in emerging economies in this article we empirically revise the hypothesis that institutions cause economic growth for emerging countries starting from a theoretical model our sample consists of 21 countries covering

beyond privatization institutional innovation and growth in china s large state owned enterprises abstract this article demonstrates that china s large state owned enterprises soes are not stagnant fossils waiting to die under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy the impact of market forces rapid growth of domestic demand for upstream products strategic integration with the world economy and the state s policy to promote large businesses china s large soes are developing new institutional forms that do not neatly fit into existing patterns china is experimentally changing its institutions through a combination of central policy local initiative and interaction with international investment this presents a challenge to the transitional orthodoxy and to ideas concerning property rights in development economics there is not a universal model of property rights and government action that works best in all circumstances china s experience with the reform of large soes shows the diverse possibilities for effective industrial institutions

macroeconomic implications of s s versus accelerator finished goods inventory strategies abstract large scale disaggregated simulation techniques involving 315 firms in 21 different industries holding 6 615 different stockpiles of purchased materials inputs are used to evaluate the implications for the stability of the economy of alternative strategies for managing inventories the simulations reveal that an s s form of production scheduling results in a somewhat less stable economy than is obtained with accelerator type inventory management

the breakdown of hierarchies in the soviet union and china a neoinstitutional perspective why did modest attempts to decentralize the centrally administered soviet system lead to its collapse while more far reaching decentralization in china left central political and administrative hierarchies intact this article analyzes the disintegration of centrally planned organizations in the context of a neoinstitutional model of the breakdown of authority within hierarchies an agency model of hierarchy is presented that incorporates the ambiguous property rights authority relations and risk sharing conditions that prevailed under central planning and then persist during postcommunist transitions this model suggests that decentralizing reforms could trigger an organizational bank run prompting local agents to seize organizational assets under their control the article also considers reputation preserving strategies that central authorities might use to avert disintegration as an application of this model the collapse of soviet political industrial and state fiscal hierarchies are considered and compared with the experience of analogous sectors in china reforms in both states transferred significant autonomy from the center to local field agents in the soviet case these agents appropriated organizational assets with little interference from the center in china by contrast the center preserved both its capacity for monitoring and its reputation for disciplining transgressions and the rise of hybrid ownership forms made expropriation of state and party assets far less attractive

fiscal policy and regional output volatility evidence from russia eller m fidrmuc j and fungac ova z fiscal policy and regional output volatility evidence from russia regional studies this paper investigates the relationship between fiscal policy and output volatility in russian regions between 2000 and 2009 accounting for endogeneity between output volatility and fiscal developments by using system generalized method of moments gmm estimation techniques the results indicate that discretionary fiscal policy contributes to output volatility and induces macroeconomic instability at the regional level in russia this corroborates previous studies using cross country data to reduce business cycle fluctuations it would be necessary to curtail procyclical fiscal activism at the regional level e g via fiscal rules and sound institutions of fiscal federalism

explaining differences in public sector efficiency evidence from russia s regions summary using the case of russia s regions this paper extends the literature on public sector efficiency in three directions an attempt to better understand differences in public sector efficiency through the study of subnational governments in one country the first examination of public sector efficiency of subnational governments in emerging markets and the first study of public sector efficiency in russia three types of scores of public sector performance and efficiency indicate substantial differences across regions an econometric examination suggests that they are largely explained by per capita income the share of federal transfers in subnational government revenue quality of governance and democratic control and the level of spending

growth in post soviet russia a tale of two transitions abstract in the early stages of post soviet russia s economic transition small scale entrepreneurial activity appeared to be a strong engine of growth moreover striking regional variations in initial conditions and adopted policy reforms appeared useful in accounting statistically for observed regional variations in entrepreneurial activity here we investigate whether these relationships have persisted as russia s transition has continued to evolve and find that they have not we then document that the emergence of bank issued credit virtually non existent outside of moscow prior to 2000 has been an important engine of growth since 2000 thus to date russia s post soviet development appears as a tale of two distinct transition paths

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

patterns of transition from plan to market patterns of transition from plan to market martha de melo cevdet denizer and alan gelb hungary s bankruptcy experience 1992 1993 cheryl w gray sabine schlorke and miklos szanyi why and when do governments initiate public enterprise reform jose edgardo campos and hadi salehi esfahani roads land use and deforestation a spatial model applied to belize kenneth m chomitz and david a gray industrial centralization in indonesia j vernon henderson and ari kuncoro guidlines on searching for a dalton improving tax reform an illustration with data from indonesia shlomo yitzhaki and jeffrey d lewis a new data set measuring income inequality klaus deininger and lyn squire

production management output volatility and good luck abstract this paper models the scale of the technology shocks as a decision variable whose value is determined by the production manager it is shown that smaller shocks enhance profit in several ways and thus the firm has an incentive to adopt more reliable production technologies the adoption of these technologies may account for the good luck hypothesis in which the stabilization of gross domestic product gdp since 1984 is attributed to smaller shocks it differs from this hypothesis in two respects first the reduced volatility should be permanent second the stabilization does not require smaller intrinsic shocks to the economy

circumstance and choice the role of initial conditions and policies in transition economies the experience of countries in transition from a planned to a market oriented economy has varied greatly the clearest differences are between the east asian countries china and vietnam and the countries of central and eastern europe cee and the former soviet union fsu china and vietnam have contained inflation and benefited from continued high growth in gdp since the beginning of their reforms while all cee and fsu countries have experienced large declines in output and most have experienced hyperinflation but even in cee and the fsu differences are marked some countries have lost over half of their gdp and growth performance in a number of countries is still poor while others are growing strongly some are still suffering from high inflation while others have successfully reduced annual inflation what determines this divergence of outcomes across transition countries no study so far has analyzed the interaction of all factors including initial conditions political change and reforms in a unified framework including cee the fsu china and vietnam the authors examine these broader interactions but focus first on the role of initial conditions such as initial macroeconomic distortions and differences in economic structure and institutions which have been emphasized less in the literature they find that initial conditions and economic policy jointly determine the large differences in economic performance among the 28 transition economies in the sample initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth but reform policy choices are not exogenous they depend in turn on both initial conditions and political reform with political reform the most important determinant of the speed and comprehensiveness of economic liberalization other findings provide additional insight into these relationships results show that liberalization has a negative contemporaneous impact but a stronger positive effect on performance over time the results also show that macroeconomic and structural distortions are negatively related to both policy and performance regarding the former unfavorable initial conditions discourage policy reforms but do not diminish their effectiveness once they are implemented the authors find some evidence that the influence of initial conditions diminishes over time this is in part because many of the initial conditions are themselves modified in the course of transition monetary overhangs are dissipated through inflation industrial overhang is eroded as plants shut down and market memory returns through experience

is fiscal consolidation self defeating a panel var analysis for the euro area countries abstract this paper studies the effects of fiscal consolidation on the debt to gdp ratio of 11 euro area countries over the period 2000q1 2012q1 using a quarterly panel var allows us to trace out the dynamics of the debt to gdp ratio following a fiscal shock and to disentangle the main channels through which fiscal consolidation affects the debt ratio we define a fiscal consolidation episode as self defeating if the level of the debt to gdp ratio does not decrease compared to the pre shock level our main finding is that when consolidation is implemented via a cut in government primary spending the debt ratio after an initial increase falls to below its pre shock level when instead the consolidation is implemented via an increase in government revenues the initial increase in the debt ratio is stronger and eventually the debt ratio reverts to its pre shock level resulting in what we call self defeating consolidation

after state socialism the political origins of transitional recessions transitions from state socialism created a startling range of initial economic outcomes from renewed growth to deep economic crises debates about the causes have largely ignored the political dis

a tale of two reforms i identify the absence of well functioning product markets in transition economies as a sufficient condition under which big bang reduces output initially while a chinese style reform increases output big bang dismantles central planning or centralized organization of production permitting monopolistic and vertically interdependent enterprises to pursue their own monopoly profits by restricting output and inter firm trade to the detriment of the economy as a whole the chinese reform by maintaining central planning but allowing enterprises to produce for the emerging product markets after they have fulfilled their output quotas under planning gives enterprises incentives to expand output beyond planned targets

developments in global inventory investment abstract this paper analyses some of the connections between macroeconomic inventory data and other gdp characteristics until now this issue has got relatively low interest though we believe it can be important in understanding macroeconomic phenomena after a brief summary of previous research six hypotheses are formulated regarding tendencies of the ratio of inventory investment to gdp and its relationship with the level of development growth and fluctuations of gdp elementary statistical methods are applied on an oecd database containing 14 of the most developed economies of the world the analysis mostly supports the hypotheses however due to the limitations by the quality of the database and the methodology used this support is not very reliable this calls attention to the need for further research on the subject

market reform and mortality in transition economies abstract the striking increase in mortality rates in russia in the early 1990s occurred simultaneously with the government s erratic attempts to introduce market reforms other transition economies such as poland and the czech republic avoided increases in death rates while they implemented rapid and deep reforms is there a link between mortality and the speed or depths of reforms as suggested by other researchers e g sachs 1996 american economic review 86 2 128 233 this paper uses aggregate data on 22 transition economies for 1989 1994 to investigate this question while the relationship between an index of reform progress and death rates is ambiguous death rates in these countries are correlated with measures of reform success such as gdp growth and the inflation rate higher crime rates and higher unemployment rates are also related to larger increases in death rates

sudden stops banking crises and investment collapses in emerging markets abstract we evaluate whether financial openness leaves emerging market economies vulnerable to the adverse effects of capital reversals sudden stops on domestic investment we investigate this claim in a broad sample of emerging markets during the period 1976 2002 if the banking sector does not experience a systemic crisis sudden stop events fail to have a significant impact on investment bank crises on the other hand have a significant negative effect on investment even in the absence of a contemporaneous sudden stop crisis we also find that openness to capital flows worsens the adverse impact of banking crises on investment our results provide statistical support for the policy view that a strong banking sector which can withstand the negative fallout of capital flight is essential for countries that open their economies to international financial flows

the transition to a market economy pitfalls of partial reform we present a theory of a partial economic reform of a planned economy similar to the one that took place in russia since 1988 and in china earlier in such a reform some markets are liberalized in the sense that producers can sell output to whomever they want including private firms at free prices but at the same time must sell to state firms at state prices we show that such a reform can result in a substantial diversion of subsidized inputs away from state firms and toward private firms even when state firms value these inputs more the result may be a reduction of total output the simple analysis sheds light on many consequences of the soviet reform such as breakdown of coordination of production increased state policing of delivery quotas prohibitions of trading cooperatives and opposition to privatization the model also explains why partial reform failed in russia but worked in china

reform without losers an interpretation of china s dual track approach to transition this paper develops a simple model to analyze the dual track approach to market liberalization as a mechanism for implementing efficient pareto improving economic reform that is reform achieving efficiency without creating losers the approach based on the continued enforcement of the existing plan while simultaneously liberalizing the market can be understood as a method for making implicit lump sum transfers to compensate potential losers of the reform the model highlights the critical roles of enforcement of the plan for achieving pareto improvement and full liberalization of the market track for achieving efficiency we examine how the dual track approach has worked in product and labor market liberalization in china

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

on the sources of business cycles in the g 7 abstract this paper examines sources of cyclical movements in output inflation and the term structure of interest rates in the g 7 it employs a novel identification approach which uses the sign of the theoretical cross correlation function in response to shocks to catalog orthogonal disturbances we find that demand shocks are the dominant source of output and inflation fluctuations in several of the g 7 countries the proportion of term structure variability explained by different structural sources does not depend on the horizon apart from the us and canada structural shocks are nearly uncorrelated across countries

the process of socialist economic transformation in this paper we consider the reform process in those central and east european countries that have made the decision to move from a more or a less planned socialist system to a private market economy one in which private ownership predominates and most resources are allocated through markets because the reform process is both complex and intertwined with political factors especially the shift towards representative democracy and because there are substantial differences among the reforming countries no single detailed road map can guide the way to the new systems rather the paper sets out general considerations that provide a framework for reform and relates the choices to some initial conditions of the various reforming countries the framework applies also to the soviet union or in the event of its disintegration to its successor states as they move to market systems

organizational isomorphism and corruption in financial institutions empirical research in emerging countries the globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in the world it is clear however that globalization is not conducive to a complete homogeneity of financial markets and institutions among others one element of diversity is the importance of the impact of corruption in emerging countries corruption decreases the credibility of financial institutions and markets scandals and unethical behavior in financial institutions erode confidence in such firms relying on neoinstitutional literature this article focuses on the link between corruption and organizational isomorphism in financial institutions in emerging countries therefore our aim is to examine the institutional reasons for corruption in financial institutions in emerging countries our structural equation model is based on empirical research in financial institutions in emerging countries a questionnaire was administrated to 70 top executives of financial institutions in 18 different emerging countries

how to reform a planned economy lessons from china the countries of eastern europe and the former soviet union have been flooded with advice from the west on how to liberalize their planned econo mies this advice is unfortunately offered in an empirical vacuum no one knows how these econo mies will react to the proposed liberalization meas ures there exists however a neglected source of information china offers a long time series of data over a decade s worth on the effects of reforms on a planned economy china s reforms were gradual but their cumulative effect has been large and they have been remarkably successful china s experiments provide some practical les sons on what kinds of reforms can work elsewhere the dominant school of thought among economists favours the big bang policy of reforming quickly and according to a comprehensive plan partial reforms in this view are useless they will be negated by the remnants of the planning system the proponents of big bang reform have been influential with poland czechoslovakia and rus sia announcing plans for a rapid transition to capi talism

stabilization and growth in transition economies the early experience this paper analyzes the growth and stabilization experience in 26 transition economies in eastern europe the former soviet union and mongolia for the period 1989 1994 inflation rates have declined significantly in most countries following an inflation stabilization program growth resumes after stabilization occurs typically with a lag of about two years reducing inflation thus appears to be a precondition for growth an econometric analysis of the short run determinants of inflation and growth illustrates the key roles of fixed exchange rates improved fiscal balances and structural reforms in spurring growth and lowering inflation and confirms that inflation stabilization programs have been beneficial for growth even after controlling for structural reforms

policy reform and growth in post soviet russia in pursuit of its transition from a command to a market economy russia has witnessed enormous regional differences in economic growth rates moreover the implementation of economic reforms has also differed markedly across regions we analyze whether regional differences in reform policies can account for regional differences in growth rates and conclude that to a considerable degree they can most notably we find that regional differences in price liberalization policies exhibit a positive direct correspondence with growth we also find that regional differences in large scale privatization exhibit a positive correspondence with the regional formation of new legal enterprises which in turn exhibits a strong positive correspondence with growth

political conditions for reform china vs eastern europe revisited the long literature of former socialist systems concludes that any effort to reform the economy without drastic political change is believed to be doomed to fail because tight political control and nonmarket coordination mechanisms are intertwined with each other indeed the history of economic reform in eastern european countries has confirmed this logic so far however the experiences of china and vietnam seem to have defied this logic we argue that the puzzle of china or vietnam can be explained by the ruling party s strong initial and more efficient control which allow the party to reform the economy without losing political control jel p20 p26 p51

a multi country analysis of aggregate inventory behavior abstract the paper provides an analysis of macroeconomic inventory trends using eight different modes we have studied the connection between inventory intensity ratio of inventory investment to gdp and the various components of gdp both as simultaneous and lagged variables data of 88 countries have been used for the analysis the analysis supports previous studies according to which even though no strong connection can be disclosed a few interesting consequences can be drawn concerning the differences of inventory intensity in different groups of countries the relation of effects of lagged and simultaneous variables and the significance of various components of gdp

the effects of reform on china s bank structure and performance abstract this paper investigates the relationship between market structure and performance in china s banking system from 1985 to 2002 a period when this sector was subject to gradual but notable reform using panel data estimation techniques both the market power and efficient structure hypotheses are tested in addition the model is extended to consider issues such as the impact of bank size ownership and whether the big four banks enjoy a quiet life on average x efficiency declined significantly and most banks were operating below scale efficient levels estimation of the structure performance models lends some support to the relative market power hypothesis in the early period the reforms had little impact on the structure of china s banking sector though the joint stock banks became relatively more x efficient there was no evidence to support the quiet life hypothesis probably because strict interest rate controls prevented the state banks from earning monopoly profits thus the ongoing liberalisation of interest rates should be accompanied by reduced concentration overall to improve competitive structure new policies should be directed at encouraging market entry and increasing the market share of the most efficient banks

the effects of wage distortions on the transition abstract before the reforms the chinese government had strong distributional objectives which it pursued mainly by direct controls over state enterprise wage rates and hiring decisions during the reform period similar controls over state enterprises continued but use of them had to reflect competition with the new nonstate sector that was mostly free from these controls based on these distributional considerations alone we can explain 1 a decline in the skills of workers in the state sector as the most able workers leave 2 higher productivity in the nonstate sector which consists of the most able workers 3 accounting losses in the state sector reflecting the transfer of tax revenue to finance higher wage payments to the unskilled and 4 restructuring within the state sector to reduce the distortions to relative wage rates

the effects of public spending shocks on trade balances and budget deficits in the european union we investigate the consequences of an increase in public spending for trade balances and budget deficits in the european union using a panel var approach whereas the literature tends to treat the trade balance gdp ratio as a single variable we include exports and imports as separate variables this allows us to track in more detail the sources of trade balance movements further we use annual rather than quarterly data this facilitates the interpretation of the shocks and reduces potential anticipation effects of fiscal policy changes however the identification assumptions become stronger and we extensively check their validity according to our baseline estimate a 1 gdp increase in public spending produces a 1 2 on impact with a 1 6 peak rise in gdp rising imports and falling exports are responsible for a fall of the trade balance by 0 5 of gdp on impact and a peak fall of 0 8 in addition the spending increase produces a 0 7 impact and peak budget deficit thereby pointing to the potential relevance of the twin deficits hypothesis for the european union jel e62 h60

the success and failure of reforms in transition economies this paper argues that an important reason why russia s performance and china s performance under capitalism have differed dramatically is that different arrangements governing the determination of prices and work practices evolved during the transition process in russia the arrangement which conferred monopoly rights to industry groups leftover from socialism prevented the adoption of better technology in china the arrangement that evolved contained no such monopoly elements the key factor in determining which arrangement evolved was the strength of the central government we put forth a model that implements these ideas and provide evidence in support of this theory

in search of the holy grail policy convergence experimentation and economic performance we consider a model of policy choice in which appropriate policies depend on a country s own circumstances but the presence of a successful leader generates an informational externality and results in too little policy experimentation corrupt governments are reined in while honest governments are disciplined inefficiently our model yields distinct predictions about the patterns of policy imitation corruption and economic performance as a function of a country s location vis aa vis successful leaders in particular it predicts a u shaped pattern in economic performance as we move away from the leader in the relevant space of characteristics close neighbors should do very well distant countries moderately well on average with considerable variance and intermediate countries worst of all an empirical test with the experience of post socialist countries provides supportive results

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation

the state and economic involution russia through a china lens abstract why has the russian economy declined at the rate the chinese economy has grown in china the party state has made possible the decentralization of property relations and the hardening of budget constraints whereas in russia the disintegration of the party state has led to privatization and soft budget constraints whereas the former combination entailed accumulation the latter combination entailed involution that is an economy that eats away at its own foundations by funnelling resources from production to exchange russia s involution has proceeded in a combined mode that is through a series of phases in which government policies try to rectify the unintended consequences of previous policies involution is also uneven as different industries adopt different strategies some rapidly exited from the old order and then disintegrated while others voiced their demands to the state and declined more slowly

new evidence of regional income divergence in post reform russia this article investigates regional income convergence in russia during 2000 2008 we test the hypothesis in which income divergence across regions of the country should give place to income convergence as the country moves toward free market economy with strong market institutions the study contributes to the existing literature by using the exponential smooth autoregressive augmented dickey fuller adf unit root test in a panel setup a novel econometric technique which encompasses cross sectional dependence results show strong evidence of on going regional income divergence in post reform period

reform strategies in transitional economies lessons from asia abstract to date with the possible exception of mongolia liberalization efforts have generally been more successful in the transitional economies of asia teas than in eastern europe and the former soviet union this paper argues that both initial conditions and policies were important in explaining the difference in economic performance the teas except mongolia placed microeconomic reforms ahead of macroeconomic ones similarly there were differences in the approaches taken in areas such as enterprise reform price deregulation and financial sector reform the teas need however to supplement their reform program with fiscal monetary and external sector reforms on an urgent basis without such actions the successes acheived so far could be at stake some general lessons for transitional economies are also derived

firm performance under just in time and traditional proxies for profit maximization abstract when the profit function is too complex to maximize directly firms must rely on some other performance criterion to guide work station activity simplification is achieved by emphasizing either flow or stock management flow management seeks to ensure that no work station is starved by available inputs stock management seeks to minimize inventories this paper develops a model to assess the performance of these two approaches for a firm that can carry both input and output inventories the model includes shocks to both demand and production and the possibility of a stockout is explicitly reflected in the optimization problem stock management dominates flow management when carrying costs are sufficiently large when carrying costs are moderate the strategy of simply ignoring shocks to demand and capacity dominates both stock and flow management the flow management approach is superior only when carrying costs are very small

the business es of the chinese state the state industrial sector is the achilles heel of china s otherwise remarkable economic performance over the past two decades most other countries in transition from socialism have transformed soes into commercial entities through systematic market driven restructuring and privatisation to become more efficient and competitive in china a series of innovative if often administrative insitutional reforms since 1978 have begun to achieve the chinese authorities goal of separating governemtn from business but the chinese state still maintains ownership of key enterprises and government agencies carry out shareholder functions typically performed by private owners in a market economy although privatisation and restructuring of soes is occurring it mostly pertains to small and medium sized firms for the principal businesses by contrast the creation of large state enterprise groups and holding companies and experiments in other forms of state asset management have become the main form of restructuring today china s soes still account for more than one quarter of national production two thirds of total assets more than half of urban employment and almost three quarters of investment while direct budgetary subsidies have declined explicit and implicit subsidies are still making their way to prop up loss making soes through the financial system and other routes at the same time soes are still producing non marketable products resulting in a sizeable inventory overhang these inefficiencies and distortions represent a drain on the country s resources and thus present a challenge to the chinese leadership for reform this paper sheds light on these challenges by analysing the incentives and constraints on china s soe reform programme four critical aspects of the reforms are highlighted and evaluated against the backdrop of international experience clarification of property rights establishment of large group holding companies and other new organisational structures improved corporate governance incentives and implementation of international financial accounting and auditing practices the paper concludes with policy recommendations

far from the tree do private entrepreneurs agglomerate around public sector incumbents during economic transition while it is well known that state enterprises in transition economies were displaced by private enterprises at a macro level little is known about whether private entrepreneurs emerged in a way that helped preserve or shift preexisting agglomerations of industrial activity at a microgeographic level to address this question we integrate competing perspectives on the role of large bureaucratic incumbents in spawning entrepreneurs we conceptualize a trade off between two countervailing effects of large incumbents on potential entrepreneurs bureaucratic socialization and exposure to capabilities this yields novel predictions about how different kinds of startups agglomerate around different kinds of incumbents we test these predictions using fine grained geographic data on founding rates by private entrepreneurs in china s bicycle manufacturing industry consistent with our theorized trade off we find evidence of a nonmonotonic effect of incumbent size on local founding rates by private entrepreneurs additional moderating effects are consistent with boundary conditions on the hypothesized mechanisms our results provide the first empirical investigation of the extent to which entrepreneurial activity agglomerated around public sector incumbents during economic transition we discuss how these insights add to the understanding of economic transition as well as how the context of economic transition adds to the understanding of entrepreneurial spawning

industrial profitability and trade among the former soviet republics the break up of the soviet union claudia senik leygonie and gordon hughes this article looks at profitability and trade in the republics of the former soviet union looking at individual industries republic by republic there emerges a picture of some highly profitable sectors along with others with negative value added the most profitable industries mostly associated with oil and gas extraction are the least protected the least intensive in labour and already the most developed the least efficient industries include food processing and light industry and are the most protected ones trade patterns both within the former soviet union and with the rest of the world are unrelated to comparative advantage consequently sizable gains from trade are potentially available and the relevant industries are identified when the single trade balance constraint is replaced by constraints at the republic level it is clear that russia stands to benefit from not having to cover with its surpluses the deficits of the other republics russia again along with kazakhstan and ukraine should benefit from a shift to market based terms of trade

pareto improving economic reforms through dual track liberalization abstract pareto improving economic reforms that also simultaneously achieve efficiency can be implemented through a strategy of dual track liberalization its success requires the feasibility of the original plan and its continued enforcement by the state the chinese experience demonstrates that such a strategy works

liberalization endogenous institutions and growth a comparative analysis of agricultural reforms in africa asia and europe thirty years ago a vast share of low and middle income countries was heavily state controlled the liberalizations of the 1980s and 1990s had greatly different effects on growth in countries in africa asia and europe a comparative framework is used to document these differences and a model is developed to formally analyze how liberalization affects production and income distribution when the institutions that govern production and exchange are also affected hypotheses are derived for how endogenous institutional adjustments affect the growth response to liberalization these insights motivate a series of explanations for the differences in performance across regions and commodities following liberalization

success and failure of reform insights from the transition of agriculture this paper analyzes the linkages between the reform strategies in transition countries and economic performance the authors focus on agriculture because of the sharpness of the policy changes fundamental differences among countries and relative simplicity of agricultural relationships the authors document post reform performance in the transition countries of asia and europe the authors show how a pricing reform and subsidy reductions b land rights reform and policies that affect farm restructuring and c the presence institutions that facilitate exchange either markets or market substitutes affect output and productivity the paper ends with general lessons on reforms and transition

the effects of government purchases shocks review and estimates for the eu in this article we review the theoretical consequences of government purchases shocks for both closed and open economies followed by a discussion of the empirical literature next we provide our own estimates for the eu countries we find that an increase in government purchases raises output consumption and investment and reduces the trade balance however the stimulating effect is weaker and the trade balance reduction is larger for the more open eu economies consistent with larger leakage effects further we show that government purchases shocks in large eu economies have non negligible consequences for economic activity in the main trading partners

cpi bias and real living standards in russia during the transition abstract the economies of the former soviet bloc experienced large declines in output during the decade of transition which began with the collapse of the soviet union in 1991 yet there are many reasons to believe that measured output and official deflators provide a poor proxy for the change in real living standards in transition economies this paper uses the engel curve methodology developed by hamilton hamilton b 2001 using engel s law to estimate cpi bias american economic review 91 3 619 630 to examine changes in real living standards in russia during the transition period and to provide an estimate of how much the official russian cpi has overstated consumer inflation we also examine changes in consumer durables home production and subjective well being to further evaluate changes in living standards our findings indicate that cpi bias has caused a substantial understatement of the growth performance of the russian economy during the transition even just allowing household final consumption to be deflated with bias we find that the level of real per capita gdp in 2001 may be understated by up to 30 compared with using a bias corrected deflator our analysis of consumer durables home production and subjective well being supports the conclusion that the decline in living standards has been substantially less than what is inferred by looking at official statistics on real output

a global compact to end poverty brian snowdon presents the text of a two hour interview conducted with jeffrey d sachs of columbia university a wide ranging discussion relating to professor sachs s work over the past thirty years on macroeconomic stabilisation the economics of transition and several important issues in the field of international economic development first snowdon provides some background to the debate relating to professor sachs s most recent work that has helped focus international attention on the growth tragedy of sub saharan africa this key humanitarian issue has received enormous coverage in the media throughout 2005 and has been highlighted in particular at the g8 meetings in gleneagles and worldwide live 8 concerts in july 2005 and the un world summit in september

the war making state and privatisation states created with the central purpose of defending national independence resist the process of macro economic reform since it appears to limit their power to pursue this aim the states of the former centrally planned economies were marked out by their extreme subordination to the military drive so the resistance to reshaping the war making state into a market facilitating state is considerable the transition tends to be halted where the old structures of central control are ended without markets supplying alternative imperatives a rent seeking state is created these themes are examined in relationship to privatisation of state owned enterprises in four countries russia china vietnam and the ukraine

bureaucrats in business the roles of privatization versus corporatization in state owned enterprise reform abstract this article provides evidence from a sample of 12 developing countries that countries which improved state owned enterprise performance the most followed a comprehensive strategy of reforms including a combination of privatization and corporatization further evidence that corporatization works better in combination with ownership and other reforms is provided through an analysis of government contracts with public managers private managers and private owners contracts with private managers and owners did better than contracts with public managers in part because the property rights of the former gave them a larger stake in the outcomes the article analyzes the political economy of state enterprise reform and finds that privatization and corporation have similar political costs and tend to succeed or fail together where reform was politically desirable politically feasible and credible countries privatized and corporatized successfully when countries were not politically ready to reform alternative ownership strategies were not successful in improving performance

gradualism versus big bang speed and sustainability of reforms a beneficial reform may be blocked by a majority if it is implemented by a big bang but the same reform may succeed with an optimally designed gradualist approach a gradualist approach can sometimes split opposition force and is in this sense more politically sustainable on the other hand if both approaches are politically preferred to no reform a big bang is often preferred to gradualism in terms of both political support as well as economic efficiency

the state led transition to liberal capitalism neoliberal organizational world systems and social structural explanations of poland s economic success neoliberals argue that rapid liberalization and privatization can transform postcommunist economies into western style capitalist systems organizational sociologists argue that these policies produce a unique variety of capitalism while world systems theorists argue that they lead to underdevelopment this article advances a social structural alternative in a crucial case poland s relative economic success resulted from prolonged state ownership and an interventionist state employing various industrial policy tools that facilitated efficiency enhancing market oriented restructuring before ushering in beneficial foreign direct investment the resulting capitalist system closely resembles the typical pattern found in most late industrializers

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

macropolicies in transition to a market economy a three year perspective countries in transition to market economies have had to implement macroeconoimic stabilization programs at the same time that they were engaged in massive changes of their political institutions and the systemic framework of their economies what has been the interaction of stabilization with economic liberalization and deep institutional reform in the countries of eastern europe in particular the relations among initial conditions political developments reform strategies and outcomes experience in eastern europe suggests that when there is a political breakthrough as in the countries under review a radical stabilization liberalization stragety is probably the least risky approach to reform and will not constrain output or structural reform over the medium term even stabilization that is initially successful in containing inflation will later come under pressure because of social policies and the structural transitions impelled by reform several factors are identified that affect the credibility of reforms and lessons are derived for countries that have stabilized and those that yet face this task

the output effect of fiscal consolidation plans abstract we show that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of a multi year fiscal plan rather than of individual fiscal shocks simulation of fiscal plans adopted by 16 oecd countries over a 30 year period supports the hypothesis that the effects of consolidations depend on their design fiscal adjustments based upon spending cuts are much less costly in terms of output losses than tax based ones and have especially low output costs when they consist of permanent rather than stop and go changes in taxes and spending the difference between tax based and spending based adjustments appears not to be explained by accompanying policies including monetary policy it is mainly due to the different responses of business confidence and private investment

inventory dynamics time lags and efficiency measures abstract standard measures employed to examine efficiency such as production efficiency in manufacturing are static in nature standard methods typically employ a stock flow approach to measure turnover and delay this is a first estimate but an inadequate approach since production processes are time dependent and dynamic this study examines theoretical issues concerning the standard method of measuring efficiency indices and introduces a refined dynamic measurement methodology the standard and proposed methodologies are applied to financial data for us tire and rubber goods industry to demonstrate the empirical differences between the two measures

home grown or imported initial conditions external anchors and the determinants of institutional reform in the transition economies in this article we examine the determinants of institutional change using a panel dataset comprising 25 transition economies a defining characteristic of our approach is that we treat institutional change as a multidimensional unobserved variable accounting for the fact that each of our indicators represents a noisy signal our results suggest that institutional change is significantly path dependent however policy can to some extent break this dependence through economic and political liberalisation at the start of the transition and with the help of an external anchor such as eu accession

circumstance and choice this article takes an integrated approach to evaluating the interaction of initial conditions political change reforms and economic performance in a unified framework covering 28 transition economies in east asia central and eastern europe and the fsu initial conditions and economic policy jointly determine the large differences in economic performance among transition economies initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth political reform emerges as the most important determinant of the speed and comprehensiveness of economic liberalization raising the important question of what determines political liberalization results suggest the importance of the level of development in determining the decision to expand political freedoms