more shock than therapy market transition employment and income in russia 1991 1995 sixteen predictions from market transition theory are assessed using survey data on employment earnings and income in russia during the first five years of market reform although the private sector has grown self employment is still rare incomes are down and unemployment is up a distended income distribution reflects unprecedented income inequality distinctive features of late soviet era stratification persist low returns to education a gender gap in earnings and low earnings among professionals the russian market transition offers more opportunity in trade consumer services and speculation and less in manufacturing than do other emerging makets this corresponds to merchat capitalism and contradicts the predictions of market transition theory everything the communists told us about communism was a lie everything they told us about capitalism turns out to be true popular russian joke circa 1996

politics and markets dual transformations the articles published in this issue of the journal help advance the debate on market reform in former socialist states in our comment besides dealing with data analysis issues we suggest several ways to improve the level of debate about substantive issues these suggestions include more attention to politics including path dependence and more attention to middle level generalizations from other developing market societies

economic transformation and income inequality in urban china evidence from panel data using panel data of 4 730 urban residents drawn from 20 cities in china this article examines changes in income determinants between the prereform and reform eras to guide this empirical study a conceptual model is developed that emphasizes the coevolution of politics and markets to synthesize theoretical ideas in the recent debate on the transformation of state socialist societies the findings show significant changes in returns to education and in the rise of private hybrid firms in the reform era there is also strong evidence of institutional persistence in returns to positional power and in the organizational hierarchy these findings reveal multifaceted processes of transformation that call for more sophisticated theoretical models and in depth institutional analyses

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

the decision to move house and aggregate housing market dynamics using data on house sales and inventories this paper shows that housing market dynamics are driven mainly by listings and less so by transaction speed thus the decision to move house is key to understanding the housing market the paper builds a model where moving house is essentially an investment in match quality implying that moving depends on macroeconomic developments and housing market conditions the endogeneity of moving means there is a cleansing effect those at the bottom of the match quality distribution move first which generates overshooting in aggregate variables the model is applied to the 1995 2004 housingmarket boom

state budget stabilization fund adoption preparing for the next recession or circumventing fiscal constraints the high rate of budget stabilization fund adoption during the 1980s is often attributed to the 1980 1982 recession in this view states adopted funds to prevent a recurrence of the fiscal crises experienced during that recession an alternative hypothesis is that some funds adopted during this period were intended to circumvent tax and expenditure limit laws we find that states with tels in place were significantly more likely to adopt statutory funds but were significantly less likely to adopt funds with stringent deposit and withdrawal rules suggesting that some funds were adopted to circumvent existing fiscal constraints

market transition and the persistence of power the changing stratification system in urban china research on transitional socialist societies has explored trends in income inequality and issues concerning who gains and who loses during market reforms we find that income inequality in a major chinese city declined only slightly during the first decade of reform policies it then increased dramatically in the subsequent five years strategic position in the state bureaucracy continues to be an important determinant of income although connections to the market system are becoming alternate sources of advantage we interpret these findings in light of the historical and institutional context of urban china

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

markets and inequality in transitional economies toward testable theories nee s 1989 and in this issue market transition theory contested by xie and hannum in this issue claims that market mechanisms have predictable implications for inequality compared to nonmarket allocation market exchange enhances the bargaining power of producers nee p 910 the core argument is that cadre advantages shall decline to the extent that markets replace redistribution as the dominant mode of economic allocation while in successive publications nee has altered his judgment about how far the market transition has proceeded in rural china and whether his theory does predict a decline of cadre privilege he has not altered the core claim about market allocation market economies vary widely in their patterns of power and privilege in ways unrelated to the extent to which a market economy has been established the variability of market economies warns against attempts to predict changes in inequality without first specifying the kinds of enterprises and other institutions that characterize the emerging market economy or even the characteristics of markets themselves we have been tempted into these predictions by the memorable polanyian contrast between two ideal typical economies redistributive and market that has proven a rich source of hypotheses about stratification szelenyi 1978 1983 and the theory of the firm kornai 1992 under state socialism this contrast has crystallized a research agenda by posing an important historical question about the social impact of the rise of market allocation in planned economies especially as it concerns the fate of communist officials but many now find that these ideal types and the continuum that bridges them are a poor guide to the analysis of emerging market economies see bian and logan 1996 lin 1995 rona tas 1994 1995 walder 1992 1995 and stark and xie and hannum in this issue general claims about the impact of markets should be viewed skeptically for the impact of markets works through the allocation of assets the characteristics of emerging markets and the political processes by which market economies are established markets per se are not the issue

mortgage debt consumption and illiquid housing markets in the great recession using a model with housing search endogenous credit constraints and mortgage default this paper accounts for the housing crash from 2006 to 2011 and its implications for aggregate and cross sectional consumption during the great recession left tail shocks to labor market uncertainty and tighter down payment requirements emerge as the key drivers an endogenous decline in housing liquidity amplifies the recession by increasing foreclosures contracting credit and depressing consumption balance sheets act as a transmission mechanism from housing to consumption that depends on gross portfolio positions and the leverage distribution low interest rate policies accelerate the recovery in housing and consumption

recombinant property in east european capitalism recombinant property is a form of organizational hedging in which actors respond to uncertainty by deversifying assets redefining and recombining resources it is an attempt to hold resources that can be justified by more than one legitimating principle property tansformation in postsocialist hungary involves the decentralized reorganization of assets and the centralized management of liabilities together they blur the boundaries of public and private the boundaries of enterprises and the boundedness of justificatory principles enterprise level field research data on the ownership structure of hungary s 220 largest enterprises and banks and an examination of the government s recent debt consolidation programs suggest the emergence of a distinctively east european capitalism that will differ as much from west european capitalism as do contemporary east asian variants

housing markets with endogenous search theory and implications abstract in this model buyers and sellers enter a housing market with imperfect elasticity buyers screen houses for sale in two segments of the market select a set of houses for search in each segment and then control their intensities of costly search among houses in their preferred sets their truncated distributions of acceptable match values are assumed to be power law partial equilibrium is calculated explicitly and steady state is characterized analytically the analysis is extended to multiple segments and markets empirical implications include higher average prices and price rent ratios in preferred segments and markets as well as spatial diffusion across segments and markets of average prices price rent ratios and search the predictions are consistent with existing empirical evidence

economic segmentation worker power and income inequality how economic segmentation generates income inequality constitutes a central question for theories of economic and social organization and of socioeconomic achievement previous research emphasizes two sources of the structural variation in income 1 employers with large amounts of resources for a variety of reasons may find it in their interests to pay workers higher wages and 2 some workers are able to acquire power against their employers as well as against other workers and can therefore extract higher earnings in this paper we investigate several issues involved in the links among economic segmentation worker power and income inequality we argue that the structure of economic segmentation is multidimensional and reflects such distinct concepts as concentration economic scale state intervention in the market capital intensity and organization size worker power also is derived from diverse sources such as union membership occupational skill and licensing class position and tenure wi

inequality and attainment in a dual labor market models of wage determination and sector attainment are estimated for a cohort of young men in a dual labor market neoclassical economic vs dual labor market views on market equilibrium are contrasted although schooling is rewarded similarly in the primary and secondary sectors other results support the dual labor market view that employment in the primary sector is rationed via a queuing mechanism

discount shock price rent dynamics and the business cycle the price rent ratio is highly volatile and predicts future returns for commercial real estate price rent variations in commercial real estate also tend to comove with investment and output we develop a general equilibrium model that explicitly introduces a rental market and incorporates collateral constraints on production as a key ingredient our estimation identifies discount rate shocks as the most important factor in 1 driving price rent variations 2 producing the long horizon predictability of real estate returns and 3 linking the dynamics in commercial real estate to those in the production sector

search liquidity and the dynamics of house prices and construction the dynamics of house prices sales construction and population growth in response to city specific income shocks are characterized for 106 us cities a dynamic model of search in the housing market in which construction the entry of buyers house prices and sales are determined in equilibrium is then developed the theory generates dynamics qualitatively consistent with the observations and a version calibrated to match key features of the us housing market offers a substantial quantitative improvement over models without search in particular variation in the time it takes to sell induces transaction prices to exhibit serially correlated growth jel d83 r21 r23 r31 we explore the consequences of time consuming search and matching for the dynamics of house prices sales and construction at the city level first we char acterize the impact of city specific income shocks on the short run dynamics of average house prices home sales construction and population growth for a panel of us cities we then develop a model in which the entry of new buyers and the construction of new houses in response to such shocks are endogenously determined our theory generates serial correlation in the growth rates of house prices and construction even if income is strictly mean reverting following shocks 1 when calibrated to data on us cities our model accounts for over 80 percent of the variance of house price movements driven by city specific income shocks and nearly half of the observed autocorrelation of house price growth in our empirical analysis we estimate a structural panel vector autoregressive var model using city level observations on the variables listed above we focus

asset level risk and return in real estate investments relatively little is known in the academic literature about the idiosyncratic returns of individual real estate investments though quite a few commercial properties command prices commensurate with the market values of small to medium publicly traded companies i use purchase and sale data from the national council of real estate investment fiduciaries ncreif to compute holding period price appreciation returns for commercial properties in stark contrast with liquid asset returns idiosyncratic drift and volatility estimates diverge as the holding period shrinks this puzzling phenomenon survives a variety of controls for vintage effects systematic risk heterogeneity and sample selection biases i derive an equilibrium search based illiquid asset pricing model which when calibrated fits the data very well thus a structural model of illiquidity seems crucial to a descriptive theory of real estate investment returns the model can be extended to other illiquid asset classes and used to price derivatives such as debt claims

getting paid wage arrears and stratification in russia1 wage arrears have played an important yet unappreciated role in the stratification of contemporary russian society delays in wage payments became rampant and persistent during the 1990s because of the particular structural institutional and policy context that accompanied russia s market reforms recent improvements in russia s economy have reduced but not eliminated wage arrears an innovative practice that has become institutionalized in some but not all postsocialist societies analyses of survey data collected in early 1998 confirm the independent stratifying role of arrears inequality in getting paid is socially structured in a different manner than inequality in contracted wages and the former proves equally or more decisive in shaping inequality in actual wages arrears occur with some regularity in other national and historical contexts this study of russia shows that where arrears are rampant researchers should incorporate them into conceptual and empirical models of earnings inequalit

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

the first shall be last entrepreneurship and communist cadres in the transition from socialism this article reviews the sociological literature on the transition from socialism to capitalism it distinguishes between the erosion and transition phases and between traditional and corporate segments in the emerging private sector panel survey data from hungary show that during the transition ex communist cadres maintain their advantageous position and do especially well in the more dynamic corporate segment they are successful because human capital is important in both capitalism and socialism and because the cadres are able to convert past political power to economic advantage contrary to the findings of studies based only on agriculture the transition increases income inequalities

does the market pay off earnings returns to education in urban china previous work on the market transition in reform era china has missed the direct link between individuals labour market history and individuals labour market outcome a typology of workers is developed based on individuals labour market histories and a model of selective mobility of workers from the state sector to the market sector is offered as an explanation for higher earnings returns to education in the market sector analysis of data from an urban survey in china reveals that commonly observed higher earnings returns to education in the market sector are limited only to recent market entrants and that early market entrants resemble state workers in both their level of earnings and returns to education these results challenge the prevailing wisdom that education is necessarily more highly rewarded in the market sector thus it is concluded that higher returns to education in the market sector should not be construed as being caused by marketization per se and instead that the sorting process of workers in labour markets helps explain the sectoral differentials

market and institutional determinants of wage differentiation in russia using a range of official and survey data the author evaluates the relative success of two approaches competitive labor market theory and industrial relations theory institutional economics in explaining wage determination in russia following a review of the analysis of wage determination by an influential team of world bank economists the author shows that increased wage inequality in russia is dominated by inequality within occupational categories within local labor markets such inequality he suggests is primarily associated with inter firm differences in wage levels rather than barriers to labor mobility or differences in human capital such a pattern of differentiation entirely accords with the analyses of those institutional economists and industrial relations theorists who stress the role of the wage in regulating and motivating the labor force above its role in securing labor market equilibrium the paper concludes by outlining the institutional framework of wage determination that underli

inventories in a competitive environment trade is sequential buyers arrive in batches and each batch completes trade before the next arrives producers allocate the available supply among all potential batches of buyers inventories accumulate whenever a batch does not arrive shocks to cost and demand are serially independent there is a stationary relationship between inventories and prices with the following properties larger beginning of period inventories tend to depress prices inventories are positively serially correlated a unit increase in inventories reduces output by less than one unit an increase in inventories leads to an increase in the price spread output tends to vary more than sales

testing for micro efficiency in the housing market using highly granular transaction level data for the norwegian housing market over the period 2002 2014 we investigate whether excessive prices persist or revert in repeat sales excessiveness in prices is detected by comparing selling prices to predicted prices implied by a hedonic model which includes a rich set of attributes persistence is rejected and there is substantial reversion in excessive prices our results also show little scope for profitable arbitrage by investing in apparently underpriced units we suggest that excessive prices are related to the stochastic arrival of interested purchasers at public showings which we show is nonrepeatable

the cyclical behavior of the beveridge curve in the housing market abstract this paper develops a business cycle model of the housing market with search frictions and entry of both buyers and sellers the housing market exhibits a well established cyclical component which features three stylized facts prices move in the same direction as sales and the number of houses for sale but opposite to the time it takes to sell a house these stylized facts imply that in the data housing vacancies and the number of buyers are positively correlated i e that the beveridge curve is upward sloping a baseline search and matching model of the housing market is unable to match these stylized facts because it inherently generates a downward sloping beveridge curve with free entry of both buyers and sellers our model reproduces the positive correlation between prices sales and vacancies and matches the stylized facts qualitatively and quantitatively

trading frictions and house price dynamics we model liquidity in housing markets the model provides a simple characterization for the joint process of prices sales and inventory we compare the implications of the model to certain properties of housing markets the model can generate the large price changes and the positive correlation between prices and sales that we see in the data unlike the data prices are negatively autocorrelated and high inventory predicts price appreciation we investigate several amendments to the model informational frictions show promise

countercyclical policy and the speed of recovery after recessions we consider the effect of some policies intended to shorten recessions and accelerate recoveries our innovation is to analyze the duration of the recoveries of various u s states which gives us a cross section of both state and national level policies because we study multiple recessions for the same state and multiple states for the same recession we can control for differences in the economic conditions preceding recessions and the causes of the recessions when evaluating various policies we find that expansionary monetary policy at the national level helps to stimulate the exit of individual states from recession we find that exogenous measures of decreases in taxes or targeted increases in federal spending reduce recovery times for state recessions we also find ambient economic conditions can extend expected recovery times other states in the same region suffering from recession around the same time the length of the preceding recession and increases in oil prices

segmented housing search we study housing markets with multiple segments searched by heterogeneous clienteles in the san francisco bay area search activity and inventory covary negatively across cities but positively across market segments within cities a quantitative search model shows how the endogenous flow of broad searchers to high inventory segments within their search ranges induces a positive relationship between inventory and search activity across segments with a large common clientele the prevalence of broad searchers shapes the response of housing markets to localized supply and demand shocks broad searchers help spread shocks across many segments and reduce their effect on local market activity

political control and public sector savings evidence from the states the right to access and ultimately spend public sector savings is determined by the party which can control the politicaloutcome this implies that anticipatedfuture changes in the state s controllingpolitical party may systematicallyadversely affect current savings extendingthe life cycle permanent income model ishow that a representative legislator willopt to forgo current saving in favor ofspending when his prospects for futurepolitical control diminish estimating apanel data model of 39 states from1973 1995 i find that an actual futurechange in the controlling party of astate s lower house significantly reducescurrent saving

the relative performance of real estate marketing platforms mls versus fsbomadison com we compare house sales on a for sale by owner fsbo platform to multiple listing service mls sales and find that fsbo precommission prices are no lower but that fsbo is less effective in terms of time to sell and probability of a sale we do not find direct evidence of the importance of network size as a reason for the lower effectiveness of fsbo we do find evidence of endogenous platform differentiation patient sellers use fsbo while patient buyers transact more often on the mls where they avoid patient sellers we discuss the implications for platform competition two sided markets and welfare

the political costs of tax increases and expenditure reductions evidence from state legislative turnover this paper estimates the political costs of increasing taxes and cutting expenditures for members of a legislature it is found that both costs are individually significant but that they are not significantly different this coincides with the first order condition for maximization of the probability of reelection republican legislatures have a higher political cost for taxes thus the party s relative bias toward smaller government is founded in stronger constituent preferences against taxes not for lower spending additionally by being ideologically conservative republicans lower the political costs of taxes while by being more liberal democrats lower the cost of cutting expenditures