why do u s states adopt public private partnership enabling legislation abstract public private partnerships or ppps have the potential to address a range of urban economic issues as of late 2012 thirty two u s states and puerto rico had enacted legislation enabling the use of ppps ppp enabling laws address such issues as the treatment of unsolicited ppp proposals prior legislative approval of ppp contracts and the mixing of public and private funds we utilize 13 key elements of ppp enabling laws to develop an index reflecting the degree to which a state s law is encouraging or discouraging of private infrastructure investment we examine why states pass such laws and why some states pass legislation that is relatively more favorable to private investment we consider demand side supply side and political institutional drivers of passage vehicle registration growth and greater traffic congestion both increase the likelihood of passage as does political agreement between a state s executive and legislative branches traffic congestion growth in per capita income and the percent of republicans in the state s house of representatives all increase a law s favorability to private investment there is little indication that traditional public finance variables such as federal highway aid affect the likelihood of passage or the favorability of a state s ppp enabling law

why is china different from eastern europe perspectives from organization theory we draw from recent work in organization theory to explain the differences in reform strategies between china and eastern europe an experimentation approach was adopted in china whereas a big bang approach was more favored in eastern europe the explanation is based on differences in the organizational structure of central planning u form in eastern europe and m form in china the m form is more flexible because it makes local experiments possible contrary to the u form where this would give rise to major complications in coordination

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

credible commitment and success with public enterprise reform abstract this paper studies why some efforts at public enterprise reform fail and why others succeed economic reforms are intended to increase efficiency and thus help sustain long term growth yet many governments have had difficulty sustaining the reforms they initiated and have reintroduced rigid controls over markets and enterprises this is because either in the process of implementation the government discovers that the costs of carrying the reform further are greater than the expected efficiency gains or the public is skeptical that the new policies can be sustained and does not take the actions necessary for the gains to be realized this paper develops a new institutionalist framework and employs various measures of policy commitment and net gain from continued reform to analyze these issues the paper suggests ways in which the potential success or failure of a reform can be assessed with implications for the steps that reformers might take to increase the chances of success

balanced and unbalanced growth abstract a model is developed that shows how two sectors or regions interact out of steady state through product labor and capital markets and how if the former interaction dominates the growth of one sector pulls along the growth of the other while if the latter interactions dominate one sector or region booms while the other declines it is then shown why liberalization of foreign trade should lead to a transition from a lower to a higher steady state growth rate and why during the course of this transition growth might initially be even slower than before liberalization

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

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

erratum to balanced and unbalanced growth journal of development economics 53 1997 41 66 abstract a model is developed that shows how two sectors or regions interact out of steady state through product labor and capital markets and how if the former interaction dominates the growth of one sector pulls along the growth of the other while if the latter interactions dominate one sector or region booms while the other declines it is then shown why liberalization of foreign trade should lead to a transition from a lower to a higher steady state growth rate and why during the course of this transition growth might initially be even slower than before liberalization

competition under credit rationing theory and evidence from rural china abstract we present a duopoly model of financial competition to describe the conditions under which competition leads to greater bank effort when repressed financial systems ration credit the model features an entrant that freely sets its interest rate and an incumbent that must charge a rate below that which is market clearing both players may exert costly effort to inform themselves about borrower types using data on rural financial institutions in china we test empirically the effects of competition on deposit growth loan portfolio composition repayment rates and other effort measures finding positive effects of competition on effort and financial performance

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

grid connected renewable energy in china policies and institutions under gradualism developmentalism and socialism abstract this communication displays some of our on going research on the incompleteness of china s advances toward best practice in policy making and institution building for renewables in particular this paper 1 summarizes how chinese policies and institutions for the deployment of renewable electricity are only partially compliant with what is internationally recognized as best practice and 2 contextualizes chinese policies and institutions for renewables in the broader picture of china s political economy much as a political economy perspective has aided the understanding of why chinese economic reforms were partial and unique the said contextualization might help explain why china s policies and institutions for renewables diverge from best practice further given that china proved successful in promoting its economic growth with partial and unique reforms the partiality and uniqueness of its renewables policies and institutions need not impede the rapid development of renewable electricity this on going research has so far combined a review of specialized literature and the business press with semi structured interviews held with relevant actors in policy business and research related to renewable energies

impacts of considering climate variability on investment decisions in ethiopia extreme interannual variability of precipitation within ethiopia is not uncommon inducing droughts or floods and often creating serious repercussions on agricultural and nonagricultural commodities a dynamic climate module is integrated into an economy wide model containing a detailed zonal level agricultural structure this coupled climate economic model is used to evaluate the effects of climate variability on prospective irrigation and infrastructure investment strategies and the ensuing country wide economy the linkages between the dynamic climate module and the economic model are created by the introduction of a climate yield factor cyf defined at the crop level and varied across ethiopian zones nine sets of variable climate vc data are processed by the coupled model generating stochastic wet and dry shocks producing an ensemble of potential economic prediction indicators analysis of gross domestic product and poverty rate reveal a significant overestimation of the country s future welfare under all investment strategies when climate variability is ignored the coupled model ensemble is further utilized for risk assessment to guide ethiopian policy and planning

large firms and industrial reform in former planned economies the case of china in china s industrial reform alongside the much studied dynamism of small industries there has been a simultaneous powerful growth of large scale state industry state planning has played an important role in this process through heavy protection from international competition and support for selected enterprises which it was hoped would benefit from economies of scale and scope these enterprises have undergone gradual institutional change with growing foreign investment and slow movement towards multiplant operation this process is one in which there are emerging institutions resembling the modern business corporation albeit with specific chinese features c 1996 academic press limited copyright 1996 by oxford university press

new institutional economics in the post socialist transformation debate the paper suggests that there is a tension between the basic tenant of new institutional economics nie and the manner in which it has been applied in the debate on post socialist transformation this tension is explored in the context of four main perspectives on nie i property rights ii transaction costs economics iii new economic history and iv evolutionary economics there are two main arguments the first is that the transformation phase should be seen as open ended rather than a closed process where the pure market is the inevitable end result the second is that although the nie literature touches on most of the issues which are relevant to post socialist transformation the insights that it offers are still too general for policy guidance

toward an economic model of the japanese firm i owe a great deal to professor moses abramovitz who suggested that i write this article i appreciate his constant encouragement and guidance which aided me throughout its preparation i am also indebted to three anonymous referees of the journal and to professors ryutaro komiya and michael riordan for their critical comments and helpful suggestions needless to say i am solely responsible for the views expressed in this paper

economic growth income inequality and poverty in china under economic reforms china s gross domestic product gdp more than quadrupled between 1978 and 1996 under economic reforms per capita disposable incomes more than tripled in the cities and almost quadrupled in the rural areas however rapid economic growth brought about large income inequality which slowed down poverty reduction in 1995 there were still 70 170 million people living in poverty this article aims to assess the relationship between economic growth income inequality and poverty using both secondary and household survey data the main findings are 1 urban rural divide and spatial inequality are two major factors accounting for overall income inequality 2 non wage and non farm incomes are more unequally distributed than wage and farm incomes and 3 the incidence of poverty is very sensitive to the changes in per capita income and inequality

institutions and government controls abstract this paper develops a model of government policy toward industrial control and regulation that sheds light on the determinants of differential country experiences in terms of organizational arrangement and enterprise performance in contrast to the model developed by shleifer and vishny shleifer a vishny r w 1994 politicians and firms quarterly journal of economics 109 995 1025 shleifer a vishny r w 1998 the grabbing hand government pathologies and their cures harvard univ press cambridge ma which suggests that government controls over firms come about when politicians can use public funds to buyoff the managers and solicit their cooperation in politically motivated redistribution of rents the present shows that it may be the ability to use the government s regulatory powers at discretion that encourages politicians to impose controls on firms and redistribute their rents the model implies that the politicians appetite for intervention tends to be greater when the cost of collecting and using public funds is higher which is the opposite of what the shleifer vishny model predicts the present model helps explain the puzzling observation that countries with poor institutions are more likely to impose extensive controls on production and maintain large and inefficient public sectors the model also sheds light on a variety of other stylized facts and puzzles and offers new hypotheses to be tested

stagflationary effect of government bond financing in the transforming chinese economy a general equilibrium analysis abstract this paper studies how the method of government debt financing affects the macroeconomic performance of the transforming chinese economy the investigation is conducted within the context of an endogenous growth model that incorporates the major institutional features of the chinese economy using this framework we evaluate the effects on the growth rate of output and inflation if the chinese government relies more on bonds and less on money creation for budget deficit and debt repayment financing it is shown that although this policy change can reduce the growth rate of the money supply it can generate a stagflationary effect reducing the rate of output growth while raising the rate of inflation if the initial fraction of government deficit and debt repayment financed by bonds is sufficiently small and the tax rate on labor income is sufficiently low

financial control in the transition from classical socialism to a market economy the transition from socialism to capitalism poses severe problems of financial management that have yet to be resolved in principle let alone in practice one unfortunate consequence is continual financial turmoil as socialist economies of the soviet union and eastern europe attempt reform inflation either open or repressed first accompanies and then undermines attempts to decentralize decision making to dampen inflation and prevent economic chaos even reform governments may be provoked to reintervene by seizing the financial assets of enterprises reinstituting price controls or commandeering outputs through state orders and similar devices but why should the transition from central planning to a market economy be inflationary understanding the system of financial control in the preexisting regime of classical socialism is the key to understanding what might go wrong in the transition under classical socialism all the means of production industrial and agricultural are state owned output targets input levels wages and prices are all set by a stalinist system of central planning accordingly i shall first identify 1 how domestic fiscal and monetary processes interact with and complement central planning in the classical socialist economy and then discuss 2 why this mechanism for securing domestic financial control and avoiding inflation under classical socialism tends to break down when decentralization begins and central planning is weakened the discussion will then turn to 3 how in a more deliberate transition domestic tax and monetary arrangements might be managed to keep the average price level stable as the market prices of individual goods and services become free to fluctuate after sufficient domestic financial control is secured

can chinese state enterprises perform like market entities productive efficiency in the chinese iron and steel industry as a consequence of economic reforms in china firms have ben affected by three essential changes first instead of surrendering all profits to the government firms now pay tax on their profits according to a contract between them and the government and retain the balance as their own controllable surplus second the central economic plan determines only part of firms production after fulfilling the command plan firms are allowed to adjust their production scale by the availability of inputs and the profitability of production third most consumer and investment goods have two prices a plan price and a market price as most of the plan prices are always lower than the market prices the latter play a basic role in determining firms profits after a decade of economic reforms the important question is can chinese state enterprises perform like market entities the analysis shows that chinese firms in transition domimic the production behaviour of market based efficiency oriented firms

comparing innovation systems a framework and application to china s transitional context abstract this paper proposes a generic framework for analyzing innovation systems anchored around five fundamental activities r d implementation end use education linkage and focused on the performance implications of a system s structure and dynamics rather than simply describing the role and performance of particular actors institutions and policies this approach focuses on system level characteristics including the distribution of these activities within the system the organizational boundaries around them coordination mechanisms evolutionary processes and the effectiveness of the system in introducing diffusing and exploiting technological innovations the framework is applied to a comparison of china s national innovation system under central planning and since reforms revealing the evolving structure and dynamics of this system and current inconsistencies and perverse incentives that policymakers must address to realize their development goals more generally it provides a basis for addressing the implicit assumptions of organizational types roles and convergence among innovation systems emerging in very different contexts whether national regional or industrial

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

from privatization to deindustrialization implications of chinese rural industry and the ownership debate revisited summary this paper examines the evolution of chinese rural industry since the rural reform in the late 1970s and revisits the debate on the role of ownership based on a case study of w county in southern jiangsu province as well as drawing on national data the author shows that the community based market dynamic had been a key factor in the expansion of rural enterprises and that its weakening in recent years has led to the closing of village enterprises and deindustrialization of the countryside large scale land expropriation sponsored by local government is the principal factor responsible for the change

the impact of global warming on agriculture a ricardian analysis reply we measure the economic impact of climate on land prices using cross sectional data on climate farmland prices and other economic and geophysical data for almost 3 000 counties in the united states we find that higher temperatures in all seasons except autumn reduce average farm values while more precipitation outside of autumn increases farm values applying the model to a global warming scenario shows a significantly lower estimated impact of global warming on u s agriculture than the traditional production function approach and in one case suggests that even without co sub 2 fertilization global warming may have economic benefits for agriculture 16 refs 5 figs 5 tabs

liquidity profit rate cycles in a capitalist economy abstract a monetary economy consisting of independent capitalist firms in which workers spend wages instantly and labor is not scarce is studied the firms create demand for each other s output through their capital outlays and create the backing for money through borrowing when all firms are identical in behavior and initial conditions and the rate of growth of money is constant the economy may be unstable around the equilibrium steady state growth path due to strong accelerator effects and follow a limit cycle trajectory

the impact of china s economic reforms on agricultural productivity growth this paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post 1978 increase in china s agricultural productivity data on post 1978 chinese agricultural performance suggest that a little over three quarters of the measured productivity increase is due to payment system changes and the remainder to price increases we also use our method to calculate incentive indices giving an estimate of the fraction of their marginal product that peasants received under the pre 1978 regime

privatization in the united kingdom lessons from experience abstract although the reasons for privatization vary across countries in the united kingdom as in other countries it also reflects a renewed belief in market forces the search for policy options that emerges from this renewal however needs to be tempered by an understanding of market as well as regulatory failures although problems facing government enterprises in developed and developing countries may differ the objective of privatization should be to reconstruct these enterprises so as to create conditions that make private sector operations effective and efficient at the same time one should recognize that this may require continued public sector activity in the sector

marketing reforms market development and agricultural production in china abstract chinese agricultural reforms have consisted of two transitional stages initially decollectivization in the late 1970s followed by market liberalization in the mid 1980s while much research has been conducted on the initial stage of increasing the incentives for farmers in collective cultivation little quantitative evidence exists on how marketing reforms and the development of rural markets has affected agricultural production decisions using more accurate and disaggregated measures of the reform and market development components of liberalization than previous research this study examined the effects of these liberalization policies on the agricultural production decisions in shaanxi province procurement quota levels were found to be positively associated with the area planted to grain crops thus quotas represent an effective way of increasing grain production and thereby also a means of achieving food self sufficiency which remains an important policy objective for the chinese government the involvement of state grain stations in free market grain trade and the expansion of rural markets has increased the area planted to the two potential cash crops soybeans and wheat and reduced the sown area of the subsistence crop corn reflecting the reduced need to plant corn as a self insurance mechanism for smoothing consumption an increase in procurement quotas increases fertilizer use on grain crops due to the policy of linking quotas to access to below market priced fertilizer but decreases the use of labor which shifts to other more profitable enterprises market development has increased these off farm employment opportunities and the earnings associated with them thereby promoting the shift of labor out of crop production and increased the use of fertilizer which has also become more available

marketization and democratization the sino soviet divergence the natural starting point should be the definition of the concepts appearing in the title the danger however is that an attempt to provide comprehensive definitions at the outset may not only prove to be excessively lengthy and cumbersome but ultimately also to a large extent futile because of its abstractness that is why i shall reduce the definitionary introduction to a minimum

reform in eastern europe how can the new governments of eastern europe succeed in moving from centrally planned to freemarket economies this incisive report identifies and describes the major policy choices to be made and discusses what will work and what will not reform in eastern europe provides a comprehensive easily read statement of reform policy that stands in the mainstream of modern western economics based on their experience with stabilization policies in other countries the authors show how eastern europe can reduce unemployment during the painful adjustment process create effective and socially acceptable mechanisms to subject enterprises to market discipline and replace barter trade under cmea with market based international trade

economic development in shanghai and the role of the state this article examines the economic development process underlying shanghai s rapid urban transformation in the 1990s it analyses the key factors that have contributed to the economic development there and assesses critically the role of the state in this process it concludes that the sheer scale of investment and the national contexts rather than far sighted economic management at the local level are the keys to its economic success the article further argues that the prevailing views regarding the local state market relationship in shanghai need to be revised beneath the facade of a proactive and omnipotent state are numerous instances of failure and ineffectiveness moreover the market is much more than a tool in the state s decision making it is a growing force that the state is trying hard to control but with increasing difficulties

access to water for the urban poor in cape town where equity meets cost recovery local authorities in south africa have responded to the post apartheid promise of redistribution and democratisation by adopting market principles in the delivery of essential services this articl

growth efficiency and convergence in china s state and collective industry in china as in the soviet union and eastern europe economic reform initiatives seek to increase productivity by introducing elements of market oriented policies and institutions into an economy formerly dominated by state planning efforts to evaluate the impact of reform of chinese industry have focused on the measurement of productivity change in state enterprises this study expands the prior framework of analysis in several directions our investigation of productivity trends is not limited to state enterprises but includes quantitative comparisons with china s fast growing collective industries which contributed 36 of overall industrial output in 1988 1 unlike previous studies our analysis works with gross rather than net output this permits us to investigate changes in the productivity of intermediate inputs which occupy a large portion of total costs in chinese industry as well as labor and capital to do this we develop a quasi frontier estimation procedure which seems appropriate for comparisons of total factor productivity based on chinese industrial data finally we offer a quantitative perspective on the extent to which reform efforts have moved industrial resource allocation toward patterns expected of a market system the analysis confirms our previous finding based on a restricted framework employing only labor fixed capital and net output that multifactor productivity in state industry has risen substantially during

the political economy of transition the overriding importance of political constraints in the transition process has led to developments of the theory of the political economy of reform what are the main insights from that theory how does it reflect the transition reality what have we learned and what do we still need to learn the present article will attempt to answer those questions

the post collective village a tale of two transitions summary this paper provides an ethnographic look at economic change in rural areas of remote regions of russia and china while the structural conditions of agriculture at the outset of reform partially explain the dramatically different trajectories of reform seen in my study sites the current state of economic stagnation or economic development in these areas should not primarily be seen as a legacy of pre reform conditions it is largely the economic policies pursued by the russian and chinese governments that have created or failed to create the conditions that enable post socialist farmers to take advantage of market opportunities

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

economic liberalization the changing role of the state and wagner s law china s development experience since 1978 summary the paper applies wagner s law of increasing state activity to illustrate the changing function of the state in china as a consequence of economic liberalization wagner s law describes the association between increasing national wealth in progressive states and the rise in state activity and expenditure this indicates that the causes of bureaucratic expansion are to be sought not just in terms of political pressures but the interplay between political considerations and the economic necessities resulting from the emergence of new property rights a simple illustrative model is developed to measure the effects of increasing national wealth and the growth of the public sector this suggests that the patterns of economic development observed by wagner in 19th century europe are not unlike those observed in china today

rural reforms and agricultural growth in china this paper employs province level panel data to assess the contributions of decollectivization price adjustments and other reforms to china s agricultural growth in the reform period decollectivization is found to improve total factor productivity and to account for about half of the output growth during 1978 84 the adjustment in state procurement prices also contributed positively to output growth its impact came mainly from the responses in input use the effect of other market related reforms on productivity and output growth was very small reasons for slowdown in agricultural growth after 1984 are also analyzed copyright 1992 by american economic association

a theory of privatization or why bureaucrats are still in business abstract privatization is a dynamic phenomenon and changes in ownership arrangements require explanations based upon changes in background variables without movements in these variables bureaucrats are likely to stay in business even if reform would increase efficiency it is argued that changes in one such variable the cost of government finance have played a particularly significant role in trigerring privatizations and related reforms the increasing cost of government finance resulting from higher levels of general public expenditure and taxation also explains the policy sequence observed in many countries in which comprehensive ownership reform is preceded by a period of increased financial stringency for state owned enterprises soes

the first privatisation selling soes and privatising public monopolies in fascist italy 1922 1925 italy s first fascist government applied a large scale privatisation policy between 1922 and 1925 the government privatised the state monopoly of match sale eliminated the state monopoly on life insurances sold most of the state owned telephone networks and services to private firms reprivatised the largest metal machinery producer and awarded concessions to private firms to build and operate motorways these interventions represent one of the earliest and most decisive privatisation episodes in the western world while ideological considerations may have had a certain influence privatisation was used mainly as a political tool to build confidence among industrialists and to increase support for the government and the partito nazionale fascista privatisation also contributed to balancing the budget which was the core objective of fascist economic policy in its first phase

the dragon awakens innovation competition and transition in the energy strategy of the people s republic of china 1949 2017 abstract based on a mix of original archival research and an extensive literature review this article assesses the history of the people s republic of china s national energy policies since 1949 we divide this history into six phases emergence 1949 1957 socialist construction 1958 1965 turbulence 1966 1978 reform 1979 2000 contestation 2001 2014 and transition 2015 present over the whole history of more than sixty years china s energy production and consumption grew at a surprising speed while energy intensity exhibited early fluctuations and a subsequent gradual decrease after the turbulence phase in tracing this history the article offers new historical and policy insights into the world s largest developing country and a theoretical contribution to the role of the state in shaping economy and society through energy policy the article lastly offers an in depth exploration of how command and control style administrative intervention and low levels of market liquidity have had a prophylactic effect on innovation and competition

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

economic transition dynamic externalities and city industry growth in china using data on two digit manufacturing industries for prefecture level cities during the period of 2000 05 this study found a significant non linear relationship between dynamic externalities and city industry growth industrial specialisation and local competition may help city industry growth but may harm growth when they exceed a certain level diversity helps industry growth but only when it reaches a certain level liberalised globalised and locally protected industries are more likely to benefit from dynamic externalities industries located in cities with greater authorities are also found to grow faster the empirical findings indicate that economic transition has created conditions to allow a larger role of dynamic externalities in stimulating city industry growth

the m form hierarchy and china s economic reform for 13 years from 1979 to 1991 economic reforms in china have generated a significant growth its gnp grew at an average annual rate of 8 7 or at 7 37 for per capita gnp 1 the chinese economic performance is in contrast to that of eastern europe and the former ussr the average growth rate of gdp in hungary was 1 8 between 1981 and 1985 and almost zero in 1988 and 1989 in poland the average gdp growth rate was less than 2 between 1981 and 1989 from both theoretical and policy perspectives china s outstanding reform performances and associated differ ent reform strategies from those of eastern europe and the ussr are particularly interesting and puzzling there are two popular views in explaining the differences between china and eastern europe the first view states that china was at a much lower development stage than eastern europe and the ussr 3 the second view argues that china has followed a gradual and piecemeal approach as

the optimal choice of privatizing state owned enterprises a political economic model we study the choices of two types of maximizing public servants over how far to carry privatization of industries and in what order to privatize two stylizations of the public servant s objectives are considered a niskanen style bureaucrat who maximizes a surplus budget subject to the constraint of staying in office and a populist who maximizes popularity consumer welfare subject to the constraint of a balanced budget other things being equal the bureaucrat will privatize the sector firms with the least market power and the largest subsidy first the populist will adopt the same policy if the marginal costs of products in the private sectors are not too high with respect to the marginal utilities if the marginal costs are too high however the populist will privatize the sector with the largest market power first we also show that privatization is easier and faster in less democratic societies

governing china s transition to the market institutional incentives politicians choices and unintended outcomes this essay reviews two books that seek to account for china s success in making economic reforms and sustaining rapid growth one perspective explains china s reformist approach in terms of politicians making choices under certain institutional rules the other sees an economic logic of market transition and emphasizes policymakers limited abilities in governing the economy the essay assesses the merits of these competing claims it calls for better specification of the causal linkages between institutional rules and politicians choices and concludes that both the dynamics and dilemmas of china s political economy are explained in terms of increasing market competition finally the essay evaluates the argument that decentralization leads to market segmentation and points to the chinese government s evolving role in dealing with the economy

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

employment tenure and earnings profiles in japan and the united states comments the relationship between job tenure and annual earnings in japan has received considerable attention from social scientists examining employment contracts and the japanese compensation system in their widely cited article masanori hashimoto and john raisian 1985 using data for 1980 showed that japanese men have greater job tenure than comparable workers in the united states and that the earnings of japanese men rise more rapidly with increased tenure they found that an additional year of tenure increases earnings in both small and large firms in japan more than does an additional year of general market experience their results for the united states indicate that general market experience increases earnings more than an additional year of job tenure the 1970 s and 1980 s were a period of substantial change in japanese labor markets due to the rapid aging of the population and the restructuring of the economy following the oil crisis the present analysis extends the work of hashimoto and raisian by estimating earnings equations for japanese men for the years 1971 1976 1981 and 1986 specifically we wish to investigate whether hashimoto and raisian s findings have been stable over time or whether changes in the labor market have altered the importance of tenure relative to total labor market experience in the japanese labor market i changes in the labor market

growth options and poverty reduction in ethiopia an economy wide model analysis abstract this study focuses on which agricultural subsectors are important in ethiopia s economic growth and poverty reduction and what kind of agricultural and nonagricultural growth is needed to achieve the millennium development goal of halving the incidence of poverty by 2015 a spatially disaggregated economy wide model was developed enabling the analysis of growth and poverty reduction linkages at national and regional levels using national household surveys agricultural sample surveys geographic information systems and other national and regional data the study reveals that agriculture can play a central role in decreasing poverty and increasing growth in ethiopia within the agriculture growth in cereals and other staple crops should receive priority agricultural growth also requires concurrent investments in roads and other market conditions at the subnational level similar growth rates within agricultural subsectors have different effects on poverty necessitating regionally based strategies for growth and poverty reduction

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

limit cycles in a model of supply side liquidity profit rate in the presence of a phillips curve abstract in the present paper we study how the dynamics of foley s model may be affected by the introduction of a money wage phillips curve with a perfect spill over of price inflation on wage inflation the upshot is a model with endogenous price and wage dynamics with unstable equilibrium meaning that the integration of the foley liquidity profit rate cycle with the goodwin cycle requires state intervention to stabilize the economy with this approach we show that foley s initial insight is consistent with flexible prices and wages only in the presence of a rule for money supply the stable equilibrium in this case may degenerate into a limit cycle if the growth rate of liquidity increases to a sufficient degree to illustrate this result we carry out the analysis both regarding general functions as well as in terms of a particular example

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

growth in transition what we know what we don t and what we should abstract this essay surveys macroeconomic issues that marked the transition from planned to market economy in central and eastern european and former soviet union countries we first establish stylized facts of the transition so far we then critically survey the theoretical literature on transition discussing explanations for the initial output fall and mediumterm issues such as optimal speed of transition disorganization institutions and sectoral reallocation as source of output dynamics we review the empirical literature to assess how well it translates the theoretical models and explains the stylized facts we conclude with suggestions for future research

structural adjustment and international trade in eastern europe the case of poland poland andrew berg and jeffrey sachs the polish economic programme is important not only in its own right hut as a key example of the benefits and possible costs of a rapid movement to convertibility this paper proposes an analytical framework and new estimates of the costs and benefits the framework shows that convertibility revolves around the relationship of two nominal variables the money supply and the nominal exchange rate return to convertibility is achieved not mainly through a real depreciation but through a nominal depreciation which helps to bring the overall price level back into line with nominal aggregate demand and particularly with the money supply the new estimates show that the costs a drop in living standards and output are less than commonly believed given the extreme inflationary conditions in 1989 and the shock following the disintegration of cmea trade the loss of output was not caused in any important way by the rapid move to free trade

energy intensity and investment ownership across chinese provinces abstract the main objective of this paper is to investigate whether openness and investment ownership are key factors in explaining the diffusion of energy saving technologies in china compared with previous studies the novel aspect of this work is the use of a rich dataset at provincial level which allows the high level of regional heterogeneity to be taken into consideration the unbalanced regional growth has been translated into differences in the need for energy resources across the vast territory of china a detailed analysis of these issues may provide new insights into the energy situation in this country the analysis is also disaggregated by type of energy coal electricity and petroleum we estimate the models by panel corrected standard errors developed by beck and katz 1995 over the period 1985 2008 results obtained confirm the hypothesis that both foreign and non state investments play a leading role in the decline of energy intensity across chinese regions whereas there is no evidence of a positive contribution of state investment the findings also reveal differences in energy intensity across regions thus confirming the importance of accounting for the regional dimension when analyzing energy consumption in china

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

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

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

a non walrasian model of the business cycle abstract this paper shows how the dynamic evolution of a short run non walrasian equilibrium can generate cycles the cyclic behavior of the system results from the combination of an unstable accelerator and of stabilizing price effects the novelties of the model presented in this paper with respect to previous contributions in non linear cycle theory are the use of a non walrasian equilibrium structure in the short run and the fact that a cycle is obtained without having to assume any ad hoc shape for the various functions involved moreover the model bridges the gap between cycle theory and the traditional short run is lm analysis

leaders managers and the organization of township and village enterprises in china abstract the managerial contractual form in china s township and village enterprise tve sector has evolved rapidly during the past 10 years our paper uses descriptive data and a theoretical model to demonstrate that these changes may be occurring in response to the rapid development of markets in transitional rural china we econometrically test the model s main hypotheses showing that the driving force behind the movement from a leader run fixed wage contract to a fixed payment contract with better incentives for the manager is the relative value of non marketed inputs owned by local leaders and firm managers firm technical structure and local market setting also plays a role in the determination of firm contractual form

organizational processes to meet new performance criteria chinese pharmaceutical firms in transition abstract the current crisis in china s state owned enterprises presents a paradox of performance since reforms began in the early 1980s many state owned enterprises are producing and selling more some even reporting increasing profits recent discussions of the crisis facing these firms however reveal that most of the gains in these performance outcomes has been achieved without regard for efficiency in many cases simply by increasing inputs only now has the government explicitly recognized the need to shift emphasis from measures of performance based on scale whether output sales or profits to those incorporating considerations of efficiency return on output sales and assets we investigate the managerial and policy implications of such a shift in key performance criteria using longitudinal data on 66 chinese pharmaceutical manufacturers we find that both the level and growth in physical assets are the strongest correlates of scale based performance measures in contrast activities which bring in engineering skills lead to new product development and increase the proportion of output that is actually sold are the strongest correlates of efficiency based performance measures for managers and policymakers these results have important implications for the timing and level of investment in particular organizational activities and resources

responsiveness flexibility and market liberalization in china s agriculture been at most only limited gains from market liberalization if one were to take the findings of this admittedly scant literature seriously it would appear as if there is at most only a relatively small impact from market reforms in china we believe there are three possible but only one plausible explanations for the findings first if market liberalization actually contributes little to no growth or increases in output or incomes this would of course in part explain why economies that lead reform with market liberalization do not experience significant gains theory and the experiences of other economies in other settings however would argue against such an interpretation second it could be that china s agricultural market liberalization has just proceeded so slowly that it is still too early for output to have been positively affected by market liberalization however as seen above the record on the market expansion and the observations of many researchers would not support this view

reform and openness why china s economic reforms have delayed democracy most theories that seek to explain democratization look to changes in the economy as the precursor to significant political liberalization locating the main causal factor in either severe economic crisis or rapid economic growth in the chinese context by contrast the communist party has extricated itself from the socialist social contract with the urban working class without losing its grip on political power moreover china has maintained a rapid pace of economic growth for over twenty five years without significant political liberalization comparative analysis of china s post 1978 reform policies yields insights both across types of socialist transition comparing china with eastern europe and russia and across time comparing china with other high growth east asian economies a key factor in china s ability to reform the economy without sacrificing political control is the timing and sequencing of its foreign direct investment fdi liberalization there are two key variables that are important to this comparative analysis china s pattern of ownership diversification and china s mode of integration into the global economy the article relates these two variables to the success of economic change without political liberalization in particular how fdi liberalization has affected relations between workers and the ruling communist party reform and openness in this context resulted in a strengthened chinese state a weakened civil society especially labor and a delay in political liberalization

privatization not the only answer abstract governments in many developing countries created state owned enterprises soes to produce goods or provide services the private sector seemed unwilling or unable to offer in many cases soes have turned out to be problem children at best inefficient and at worst unable to fulfill their original functions now the recommended solution to the problem of state owned enterprises is privatization but privatization is no more a solution to the problems of soes than soes were a solution to the problems they were created to solve the problem of soes is not ownership but rather a lack of explicit goals and objectives and an absence of organization cultures and systems that support and encourage fulfillment of those goals and objectives in some circumstances privatization may aid in fulfillment of an enterprise s goals and objectives because of the culture and systems it fosters in other cases not

bureaucrats in business chinese style the lessons of market reform and state entrepreneurialism in the people s republic of china in the 1990s parts of the state bureaucracy in china have been setting up new profit seeking risk taking businesses some of these businesses are entrepreneurial rather than rent seeking and are an unplanned and unanticipated development in china s market oriented economic reforms what are the lessons of this phenomenon for the developing world state entrepreneurialism may create problems such as reduced government control over departmental finance loss of state assets and uneven provision of services it is nevertheless an innovative solution to the politically difficult problem of bureaucratic restructuring and confounds the development orthodoxy fostered by neoliberalism that states will resist market reform it also demonstrates that to understand fully the politics of market reform we must research the activities of subcentral state bureaucrats as well as central leaders and policymakers

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

the political economy of chinese style privatization motives and constraints summary the paper examines how the privatization of chinese state owned enterprises soes can be successfully triggered and completed by identifying the motives of local government leaders and the constraints that face them during transition we conclude that first whether local governments are motivated to privatize their soes depends on if the ownership transfer is expected to stimulate sufficiently high growth of local tax revenues without sacrificing the bureaucrats private control benefits second a specific privatization program can succeed only if it manages to satisfy the managerial cooperation constraint the workers compensation constraint and the bank debt servicing constraint the motives cum constraints political economy approach offers an important explanation for the pace and scope of the ongoing chinese style privatization

the impact of regulation on economic growth in developing countries a cross country analysis summary the role of an effective regulatory regime in promoting economic growth and development has generated considerable interest among researchers and practitioners in recent years in particular building effective regulatory structures in developing countries is not simply an issue of the technical design of the most appropriate regulatory instruments it is also concerned with the quality of supporting regulatory institutions and capacity this paper explores the role of state regulation using an econometric model of the impact of regulation on growth the results based on two different techniques of estimation suggest a strong causal link between regulatory quality and economic performance