EC 430, Post-Communist Economic Transition 









EC 430, Post-Communist Economic Transition
Assignments and Discussion Questions

Assignments and dates are tentative and may be adjusted depending on class progress.

READING ASSIGNMENTS AND DISCUSSION QUESTIONS

 February 14, 15

 March 6, 7

 April 3, 4

 April 24, 25

 February 21, 22

 March 13, 14

 April 10, 11

 May 1, 2

 February 28, 29

 March 27, 28

 April 17, 18

 Review for Final

Reading to be done for February 14, 15

Berliner, Joseph, "Informal Organization of the Soviet Firm," Quarterly Journal of Economics, Volume 66 (1952), No. 3, pp. 342-365. JSTOR.

Ericson, Richard, "The Classical Soviet-Type Economy: Nature of the System and Implications for Reform, Journal of Economic Perspectives, Volume 5 (1991), No. 4, pp. 11-29. JSTOR.

Kornai, Janos, The Socialist System, chapters 1-8.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) Kornai lays out the building blocks of the socialist system (e.g., the political structure and ideology, property forms, coordination mechanisms, etc.). You should aim to understand each of these independently and then give some thought to how, in his portrayal, they fit together and which shapes the others. That is, what is fundamentally causal?
 
(2) What does Ericson consider to be the primary obstacle to the reform of the centrally planned economic system? Why?
 
(3) With reference to the Berliner, how are managerial goals either consistent with or contradictory to general system-wide goals.
 

 

 

Reading to be done for February 21, 22

Lin, Justin, The China Miracle, chapters 2 and 3.

Kornai, Janos, The Socialist System, chapters 9 - 14.

Ofer, Gur, "Soviet Economic Growth: 1928-1985," Journal of Economic Literature, Volume 25 (1987), No. 4, pp. 1767-1833. JSTOR.

Gaddy, Clifford, The Price of the Past: Russia's Struggle with the Legacy of the Militarized Economy, chapters 2 and 3. On reserve at Starr Library.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) How should we evaluate the costs and benefits of the development/growth model pursued by these economies? On what basis should we evaluate its success or failure?
 
(2) What were the general causes and consequences of shortage (both in a macro and micro-economic sense) in these economies? What, specifically, were the implications in terms of how efficiently resources were allocated? What do you think might be the consequences for the transition?
 
(3) What do you think are the implications for the transition today of the development/growth strategy pursued by these economies while still under central planning? Speculate on to what extent this legacy may either help or hinder the move back to the market.
 
These are general questions that apply to the readings as a whole. We will also be discussing each of the readings individually. So be sure to come prepared to talk about each one.

 

 

 
 
Reading to be done for February 28, 29
Chen, Kang et al., Lessons from China's Economic Reform, Journal of Comparative Economics, Volume 16 (1992) 201-225. On reserve at Starr Library.

Kornai, Janos, The Socialist System, chapters 16-17, 19 and 21.

Lin, Justin, The China Miracle, chapters 5 and 6.

Murphy, Kevin et al., "The Transition to a Market Economy: Pitfalls of Partial Reform" Quarterly Journal of Economics, Volume 107 (1992), No. 3, pp. 889-906. JSTOR.
 
Wolf, Thomas, "Lessons of Limited Market-Oriented Reforms," Journal of Economic Perspectives, Volume 5(1991), No. 4, pp. 45-58. JSTOR.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) What were the general causes and consequences of some of the first attempts to gradually or partially reform the classical socialist system? In general terms, what elements of the system were retained and what elements were changed?
 
(2) What seem to have been the lessons from China's reform experience and to what extent might have been applicable to other socialist economies?
 
(3) What was the role given to the private sector in these reform programs?
 
(4) In a reading that we looked at the first week, Ericson wrote "...[T]he primary obstacle to successful reform is that the defining characteristics of the ... system are interconnected and mutually supporting; altering one or a few is merely disruptive of the stable functioning of the system and of its effectiveness. Hence a meaningful reform must eliminate all ... characteristics, more or less simultaneously." Do you agree?
 
 
Reading to be done for March 6, 7
 
Boycko, Maxim et al., Privatizing Russia, chapters 1-3. On reserve at Starr Library.

Lipton, David and Jeffrey Sachs "Creating a Market Economy in Eastern Europe: The Case of Poland, Brookings Papers on Economic Activity, Volume 1 (1990), pp. 75-133. On reserve at Starr Library

Murrell, Peter, "Evolution in Economics and in the Economic Reform of Centrally Planned Economies," chapter 3 in Emergence of of Market Economies in Eastern Europe. On reserve at Starr Library.
 
Murrell, Peter, "The Transition According to Cambridge, Mass." Journal of Economic Literature, Volume 33 (March, 1995), pp. 164-178. JSTOR.
 
Shiller, Robert et al., "Popular Attitudes Toward Free Markets: The Soviet Union and the United States Compared," American Economic Review, Volume 81 (1991), No. 3, pp. 385-400. JSTOR.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) Many critics of efforts to rapidly liberalize, marketize and privatize suggested that their proponents were proposing a 'cookie cutter' package of reforms -- one that disregarded the region's unique economic and political institutions, as well as its culture.
(a) Murrell's particular critique of this type of 'shock therapy' or 'big bang' reform was one of the most sophisticated and well thought out. What are his arguments and how does he elaborate, in both his articles, on the general criticism leveled above? To what extent do you find his arguments convincing?
(b) Reading the reform blueprints of Lipton and Sachs as well as Boycko et al., do you feel that their line of reasoning either disregards or misinterprets the region's economic and political institutions? In other words, does the 'cookie cutter' criticism apply? If so, in what way?
 
(2) How do Boycko, Shleifer and Vishny use the Coase Theorem to analyze property rights and property rights reform in transitioning economies? Do you agree with their conclusions about the appropriate transitional "paths to efficient ownership?"
 
(3) Are you convinced by the gist of Shiller et al.'s argument that their surveys suggest that cultural / historical influences should not be viewed as a constraint on rapid economic reform? If you are not convinced, what do you find objectionable about their approach?
 
 

 

 
Reading to be done for March 13, 14

Blanchard, Olivier, Economics of Post-Communist Transition, chapters 1 and 2.
 
EBRD Transition Report 1999, chapter 4.
 
Johnson, Simon and Gary Loveman, Starting Over in Eastern Europe: Entrepreneurship and Economic Renewal, chapters 2-4. On reserve at Starr Library.
 
Kornai, Janos, "Transformational Recession: The Main Causes," Journal of Comparative Economics, volume 19 (1994), pp. 39-63. On reserve at Starr Library.
 
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) Compare and contrast Kornai's and Blanchard's portrayals of the macroeconomic processes at work in the early stages of the transition.
With regard to the Blanchard, focus your reading efforts on the first chapter (the empirical story); in the second chapter, try to get a good feel for what he describes as the three mechanisms of the transition (re-allocation, restrucutring and dis-organization). Don't get too caught up in the math.
 

 

(2) To what extent do you find evidence for the macroeconomic processes described by Kornai and Blanchard in the case studies of Johnson and Loveman?
 
(3) According to the EBRD's Transition Report, what are the major structural changes that have occurred in Eastern Europe and the former Soviet Union?
 
 
 
Reading to be done for March 27, 28
de Melo, Martha et al., "Patterns of Transition from Plan to Market," World Bank Economic Review, volume 10, pp. 397-424. On reserve at Starr Library.
 
EBRD Transition Report 1999, chapters 2, 3 and 5.
 
Fischer, Stanley et al., "Stabilization and Growth in Transition Economies: The Early Experience" Journal of Economic Perspectives, volume 10 (Spring, 1996), pp. 45-66. JSTOR.
 
Hellman, Joel, "Winners Take All: The Politics of Partial Reform in Post-Communist Transitions, World Politics, volume 50 (January 1998), pp. 203-234. Project Muse.
 
Woo, Wing T. and Jeffrey Sachs, "Structural Factors in the Economic Reform of China, Eastern Europe and the Former Soviet Union," Economic Policy, volume 9 (April, 1994), pp. 101- 145. On reserve at Starr Library.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) How do Woo and Sachs explain the variation in performance between China on the one hand and East European and former Soviet countries on the other? To what extent do they attribute the difference to initial conditions and to what extent to reform policies?
 
(2) According to Hellman, what groups in transitional countries have been the main political obstacle to economic reform? Why? How is the J-curve integrated into his analysis? And how does he explain the variation across transitioning countries with regard to the comprehensiveness of their respective reform packages?
 
(3) In trying to explain the different transitional experiences of formerly socialist countries, what sort of causal links do Fisher et al. and de Melo et al. explore? (And the corollary: what relationships are not explored?) What are their findings? In their empirical analysis, pay particular attention to how they define their independent and dependent variables.
 
(4) Using the most up-to-date data, where do the authors of the EBRD's Transition Report 1999 come down with respect to the questions taken on by the other papers that are assigned for this week (e.g., why reform has been introduced at varying speeds and why performance across countries has differed)?
 
 
 
Reading to be done for April 3, 4
 
Blanchard, Olivier, Economics of Post-Communist Transition, chapter 3.
Again, focus on the economic relationships that he's describing more than the math.
 
EBRD Transition Report 1999, chapters 7 and 9.
 
Gaddy, Cliff and Barry Ickes, "Russia's Virtual Economy," Foreign Affairs, 1998:5. On reserve at Starr Library.
 
Gustafson, Thane, Capitalism Russian Style, chapters 1 and 2.
 
Jefferson, Gary and Thomas Rawski, "Enterprise Reform in Chinese Industry" Journal of Economic Perspectives, volume 8 (Spring, 1994), pp. 47-70. JSTOR.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) How does a firm's ownership form (private / non-private) affect its decision to re-structure in the transition? To the extent that generalizations may be difficult, how might our answers be more precise if we differentiate among types of private and types of non-private ownership? Or if we differentiate across regions?
 
(2) Should re-structuring be considered uni-dimensionally? (Or is there "good" re-structuring and a "bad" re-structuring?)
 
(3) What factors besides ownership form influence the re-structuring decision? How would you prioritize them in terms of their importance?
 
(4) Explain the extent to which the firm-level decision to re-structure or not to re-structure contributes to the "virtual economy" that Gaddy and Ickes describe in Russia.
 
 
 
Reading to be done for April 10, 11
 
EBRD Transition Report 1999, chapter 6.
 
Frye, Timothy and Andrei Shleifer, "The Invisible and the Grabbing Hand," American Economic Review, volume 87:2, pp. 354-358. On reserve at Starr Library.
 
Gustafson, Thane, Capitalism Russian Style, chapters 7 and 9.
 
Qian, Yingyi and Joseph Stiglitz, "Institutional Innovations and the Role of Local Government in Transition Economies: The Case of Guangdong Province of China" in eds. John McMillan and Barry Naughton, Reforming Asian Socialism: The Growth of Market Institutions, chapter 8, pp. 175-193. On reserve at Starr Library.
 
Shleifer, Andrei and Robert Vishny, "Corruption," Quarterly Journal of Economics, August 1993, pp. 599-617. JSTOR.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
(1) To what extent does the transition transform the state's role in the economy. What type of variation along these lines do we see across countries?
 
(2) What roles can the state play to complement the development of markets? What roles can the state play that hinder the develop the markets?
 
(3) Why, and under what particular circumstances, is corruption damaging to the welfare of transition economies?
 
(4) Is the post-communist state, in general, weak or strong? Under what criteria? Give examples.
 
Again, response papers are welcome. We will also be covering some of the readings that we didn't have a chance to get to last week.
 
 
 
Reading to be done for April 17, 18
 
World Development Report, 1996, chapters 4 and 8. On reserve at Starr Library.
 
No questions this week.
 
Reading to be done for April 24, 25
 
EBRD Transition Report 1999, chapter 8.
 
Johnson, Simon et al., "Contract Enforcement in Transition," mimeo. EBRD Working Paper, No. 45.
 
Raiser, Martin, "Trust in Transition," mimeo. EBRD Working Paper, No. 39.
 
Sicular, Terry, "Establishing Markets: The Process of Commercialization in Agriculture," in ed. Andrew Walder, Zouping in Transition, chapter 5, pp. 115-153. On reserve at Starr Library.
 
Whiting, Susan, "Contract Incentives and Market Discipline in China's Rural Industrial Sector, in eds. John McMillan and Barry Naughton, Reforming Asian Socialism: The Growth of Market Institutions, chapter 4, pp. 63-110. On reserve at Starr Library.
 
SOME QUESTIONS TO CONSIDER BEFORE CLASS:
 
(1) What are the institutional pre-conditions for the evolution of market-based transacting (particularly transacting that involves a commitment or promise made by one party to do something in the future -- e.g., re-pay a trade credit)?
 
(2) To what extent is the evolution and growth of markets dependent upon the roles and functions played by governmental bodies?
 
(3) With regard to building up a network of suppliers and clients, what disadvantages do new entrants into a market face vis a vis existing market participants?
 
(4) To what extent do the market-supporting institutions provided by governmental bodies complement or substitute for market-supporting mechanisms (e.g., private contract enforcement, reputation, trust) that may have non-public-sector origins?
 
Again, response papers are welcome. We will also be covering some of the readings that we didn't have a chance to get to last week.

 

Reading to be done for May 1, 2
Carlin, Wendy et al., "Measuring Progress in Transition and Toward EU Accession: A Comparison of Manufacturing Firms in Poland, Romania and Spain," mimeo. EBRD Working Paper, No. 40.
 
von Hirschhausen, Christian and Jurgen Bitzer, "Eastern European Shipbuilding's Cruise Towards World Markets," in eds. von Hirschhausen and Bitzer, The Globalization and Innovation in Eastern Europe: From Post-socialist Restructuring to International Competitiveness. On reserve at Starr Library.
 
Lavigne, Marie, "Reintegrating the World Economy," chapter 9 from The Economics of Transition: From Socialist Economy to Market Economy. On reserve at Starr Library.
 
Again, response papers are welcome. Write up a brief summary of the major points in the Lavigne chapter.