3808 ECON ECONOMICS OF TRANSITION Course outline Winter 2011
Instructor: Dr. Crina Viju Email: [e-mail] Phone: [phone]x8440 Office: DT 1303 Classes: Mondays, 11:35 AM 2:25 PM, Room: Tory Building 340 Office hours: Thursdays: 2:30 PM - 4:30 PM or by appointment Prerequisite: ECON 1000 or FYSM 1003 Teaching Assistant: Sara Rose (Email: [e-mail]) Office hours: Mondays, 3:00 PM 5:00 PM, Room: Loeb 867 Course description: The overall aim of this course is to understand the process of transition from a socialist, centrally planned economy to a capitalist market-type economy. Classical socialism is criticized and the processes of transition in countries of Central and Eastern Europe, the former Soviet Union, and Asia are compared. In order to provide a background for our in-depth study of the economics of transition, we will first examine the legacy of the Soviet economic system, which these countries inherited. We then explore the demise of central planning and the debates about the best practices in transforming socialist economies. We review the progress of transition in various countries concentrating on macroeconomic stabilization, market liberalization, firm privatization, institutional development and the establishment of a social safety net. The final task of the course is to examine to what extent differences in economic performance in post-communist countries during transition are associated with: The initial level of economic development; The magnitude of initial distortions in industrial structures and trade patterns; Chosen reform paths (shock therapy or gradual transition), speed of liberalization; Institutional capacities of the state; Macroeconomic stabilization and industrial policies; Other factors.
Course requirements and policies There will be a Midterm and a Final Exam. The Midterm will be given on February 28, while the date for the Final exam will be announced later. Each student is expected to solve two assignments which will be given by the instructor on Session 5 (January 31) and Session 11 (March 14). The assignments will be posted on WebCT and you will have one week to solve them. The assignments will include a combination of theoretical problems, which students can solve based on the information taught in the class and analytical issues for which students are allowed to use any other materials. The Midterm and Final exams will follow the example of the assignments. If a student is unable to take an examination or turned in a scheduled assignment, it is the students responsibility to contact the instructor prior to the scheduled completion date; students who miss an exam and fail to make alternative prior arrangements will receive a grade of zero for the assignment. Late work is penalized 10% per day and assignments are not accepted after 7 late days except for documented medical reasons. Reading is required for most classes. Readings should be done in advance of class meetings to facilitate discussion. Some readings are on reserve in the McOdrum library. Other materials can be found on-line through the library catalogue or from the instructor. Locations: RE = on reserve in main library ON = on-line, through the library catalogue I = from the instructor Country presentation The instructor will divide the class in 10 or 12 groups (depending on the final number of students) which will give a 10-15 minute presentation on a different transition country. These will be spread out over several class periods. You should address the following issues: (a) Why and when the country became socialist, (b) any important events during the socialist era, (c) how the economy was transformed during the socialist era, (d) how and when it broke with its socialist past, (e) significant political events and economic developments since the beginning of its transition, identifying current issues facing the government and what projects they are pursuing in conjunction with the international development agencies (World Bank, EBRD, IMF, etc.). Each group is required to submit on the day of presentation a 4-6 pages report on the specific transition country addressing the above issues. Evaluation breakdown: Assignments 2 x 10% Midterm exam Final Exam 20% 30% 30%
Country presentation and Class Discussion For Students with Disabilities:
20%
Students with disabilities requiring academic accommodations in this course must register with the Paul Menton Centre for Students with Disabilities (PMC) for a formal evaluation of disability-related needs. Registered PMC students are required to contact the PMC to ensure that I receive your Letter of Accommodation, no later than two weeks before the first assignment is due or the first in-class test/midterm requiring accommodations. If you only require accommodations for your formally scheduled exam(s) in this course, please submit your request for accommodations to PMC by the last official day to withdraw from classes in each term. For more details visit the PMC website: http://www.carleton.ca/pmc/students/acad_accom.html. For Religious Observance: Students requesting academic accommodation on the basis of religious observance should make a formal, written request to me during the first two weeks of class, or as soon as possible after the need for accommodation is known to exist. For more details visit the Equity Services website: http://www.carleton.ca/equity/accommodation/student_guide.htm. For Pregnancy: Pregnant students requiring academic accommodations are encouraged to contact Advisor in Equity Services to complete a letter of accommodation. The student must an appointment to discuss her needs with me during the first two weeks of class, or possible after the need for accommodation is known to exist. For more details vis it Services website: http://www.carleton.ca/equity/accommodation/student_guide.htm. an Equity than make as soon as the Equity
Academic Integrity and Conduct: Ensuring that you understand and follow the principles of academic integrity laid out in the Calendar is vital to your success. Ensuring that your work is your own and reflects both your own ideas and those of others incorporated in your work is important: ensuring that you acknowledge the ideas, words, and phrases of others that you is use a vital part of the scholarly endeavor. If you have any questions at all about academic integrity in general or about specific issues, contact me and we can discuss your questions.
TENTATIVE COURSE OUTLINE January 3 Week 1: Outline Macroeconomic notions: GDP (components, measurement problems, comparisons among countries); Economic growth; Economic development Readings: Roland, Gerard (2000). Transition and Economics. Politics, Markets and Firms. Massachusetts Institute of Technology: Introduction (RE)
January 10 and 17 Weeks 2 & 3: Introduction Readings: Kornai, Janos (1992). The Socialist System. The Political Economy of Communism. Princeton University Press: Chapters 1-4 (RE) Lavigne, Marie (1999). The Economics of Transition. From Socialist Economy to Market Economy. St. Martins Press: Chapter 1 (RE) Transition economies in the framework of comparative economic systems. Readings: Gregory, Paul and Stuart, Robert (1992). Comparative Economic Systems. Houghton Mifflin Company. 4th edition: Chapters 7, 8 (6th edition Chapters 6,7) (RE) Gregory, Paul and Stuart, Robert (1998). Russian and Soviet Economic Performance and Structure. Harper Collins College Publisher. 6th edition: Chapters 1, 12, 13 (RE) Lavigne, Marie (1999). The Economics of Transition. From Socialist Economy to Market Economy. St. Martins Press: Chapter 6 (RE)
January 24 Week 4: History and Economics of Soviet Planned Economy Readings:
Lavigne, Marie (1999). The Economics of Transition. From Socialist Economy to Market Economy. St. Martins Press: Chapter 2 (RE) Gregory, Paul and Stuart, Robert (1998). Russian and Soviet Economic Performance and Structure. Harper Collins College Publisher. 6th edition: Chapters 2-5 (RE) Gregory, Paul and Stuart, Robert (1992). Comparative Economic Systems. Houghton Mifflin Company. 4th edition: Chapters 12, 15 (6th edition Chapters 9,13) (RE)
January 31 hand out assignment 1 Week 5: Industrial Organization and Structural Inefficiencies Readings: Gregory, Paul and Stuart, Robert (1992). Comparative Economic Systems. Houghton Mifflin Company. 4th edition: Chapters 12, 15 (6th edition Chapters 9,13) (RE) Lavigne, Marie (1999). The Economics of Transition. From Socialist Economy to Market Economy. St. Martins Press: Chapters 3-5 (RE)
February 7 hand in assignment 1 Week 6: How to Organize Transition? Shock Therapy vs. Gradualism. Transition Strategies and Performance. Readings: Popov, Vladimir (2007). Shock Therapy Versus Gradualism Reconsidered: Lessons from Transition Economies after 15 Years of Reforms. Comparative Economic Studies, Vol. 49 (1), pp. 1-31 (ON) Godoy, Sergio and Stiglitz, Joseph E. (2004). Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later. NBER working paper #11992. http://www.nber.org/papers/w11992 Chen, Kang et al. (1992). Lessons from Chinas Economic Reform. Journal of Comparative Economics. Vol. 16, pp. 201-225 (ON)
February 14 Week 7: Macroeconomics of Transition Readings: Lavigne, Marie (1999). The Economics of Transition. From Socialist Economy to Market Economy. St. Martins Press: Chapter 7 (RE) Campos, N.F. and Coricelli, F. (2002). Growth in Transition: What We Know, What We Dont, and What We Should. Journal of Economic Literature. Vol. 40(3), pp. 793-810 (ON) Popov, Vladimir (2003). Currency Crises in Russia and Other Transi tion Economies. In International Financial Governance under Stress. Global Structures versus National Imperatives. Edited by Geoffrey R.D. Underhill, Xiaoke Zhang, Cambridge University Press. Based on the presentation at the AEA meeting in Atlanta in 2001. http://httpserver.carleton.ca/~vpopov/documents/CC-Atlanta-2001.pdf
February 21 Week 8: Reading week
February 28 Week 9: Review class. Mid-term exam.
March 7 Week 10: Privatization and Industrial Restructuring Readings: Lavigne, Marie (1999). The Economics of Transition. From Socialist Economy to Market Economy. St. Martins Press: Chapter 8 (RE) Shleifer, Andrei (1998). State versus Private Ownership. Journal of Economic Perspectives. Vol. 12(4), pp. 133-150 (ON) Comparison: Russia and China
Qian, Y. (1999). The Process of Chinas Market Transition (1978-1998): The Evolutionary, Historical and Comparative Perspective. http://www.cebc.org.br/sites/500/522/00000019.pdf Sachs, Jeffrey and Woo, Wing T. (1994). Structural factors in the Economic Reform of China, Eastern Europe and the Former Soviet Union. Economic Policy. Vol. 9, pp. 101-145 (ON)
March 14 hand out assignment 2 Week 11: Labor Market and Social Consequences of Transition Readings: World Development Report (1996). From Plan to Market. World Bank. Chapters: 4. http://www.rrojasdatabank.info/wdr1996toc.htm Boeri, T. and Terrell, K. (2002). Institutional Determinants of Labor Reallocation in Transition. Journal of Economic Perspectives. Vol. 16(1), pp. 51-76 (ON) Milanovic, Branko (1998). Income Inequality and Poverty during the Transition from Planned to Market Economy. The World Bank. Chapters 4, 5. http://wwwwds.worldbank.org/external/default/WDSContentServer/IW3P/IB/1998/02/01/000009265_3980 319100155/Rendered/PDF/multi_page.pdf
March 21 hand in assignment 2 Week 12: Financial Sector Readings: Popov, Vladimir (1999). The Financial System in Russia as Compared to Other Transition Economies: The Anglo-American versus the German-Japanese Model. Comparative Economic Studies. Vol. 41(1), pp. 1-42 (ON) World Development Report (1996). From Plan to Market. World Bank. Chapters: 6. http://www.rrojasdatabank.info/wdr1996toc.htm
March 28 Week 13: Government and Legal Reform Readings:
Shleifer, Andrei (1997). Government in Transition. European Economic Review. Vol. 41, pp. 385-410 (ON) Shleifer, Andrei and Vishny, Robert (1993). Corruption. Quarterly Journal of Economics. Vol. 108, pp. 599-617 (ON) Frye, Timothy and Shleifer, Andrei (1997). The Invisible and the Grabbing Hand. American Economic Review. Vol. 87(2), pp. 354-358 (ON)
April 4 Week 14: Lessons and Challenges Readings: Roland, Gerard (2000). Transition and Economics. Politics, Markets and Firms. Massachusetts Institute of Technology: Chapter 13 (RE) Kornai, J. (2006). The great transformation of Central Eastern Europe. Success and disappointment. Economics of Transition 14(2), pp. 207-244. Review