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   Course Title    Transition to a Market Economy: Economics and Politics
Lecturer    Evgenia Kolomak
Institution    Novosibirsk State University
Country    Russia


I. Introduction

The topics covered by, and the structure of, the course assume that students are familiar with Intermediate Microeconomics, Macroeconomics, International Economics, and Public Economics.

II. Objectives of the course

To get knowledge in the transitional processes in Eastern Europe, CIS countries, China and other transitional countries; to acquire current economic and social problems of the transitional countries; to apply methods of political economy, macroeconomic, microeconomic and institutional analysis to problems of transitional economy.

III. Course Detail

Understanding Transition

The initial situation before transition. Objectives and constrains of transition. Stylized facts about transition: differences in reform paths and strategies; differences in macroeconomic performance after liberalization; differences in enterprise performance in response to changes in ownership and corporate governance.

Literature

Aslund A. (1994). "Lessons of the First Four Years of Systematic Change in Eastern Europe." Journal of Comparative Economics, 19.

Aslund A. (1995). How Russia Became a Market Economy. Washington, D.C.: Brookings Institution.

Blanchard, O. (1997) The Economics of Transition in Eastern Europe. Oxford, UK: Clarendon Lectures. Oxford University Press.

Kornai, J. (1995) Highways and Byways: Studies on Reform and post-Communist Transition. Cambridge, MA. And London: MIT Press.

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Political Constrains of Reforms

The importance of political constrains. Efficiency and compensation of losers from reform. Tactics of reforms (divide-and-rule tactics, packaging reforms to gain majority support). Transfers to losers and asymmetric information.

Literature

Dewatripont, M., G.Roland. (1992) "Economic Reform and Dynamic Political Constrains." Review of Economic Studies, 59.

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

The Politics of Reforms under Uncertainty

Aggregate uncertainty: the trade-off between big bang and gradualism; the role of complementarily and reform momentum. Optimal sequencing: sequencing of reforms with differences in expected outcome, sequencing of reforms with differences in risk.

Literature

Berlocchi, G., Spagat. (1997). "Structural Uncertainty and Subsidy Removal for Economics in Transition". European Economic Review, 41(9).

Dewatripont, M., G.Roland. (1995) "The Design of Reform Packages under Uncertainty" American Economic Review, 85.

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Mass Privatization

The economic costs of mass privatization programs. Political effect of privatization. Modeling of possible privatization reversal. The different approaches to privatization. Models of privatization.

Literature

Bolton P. (1995) "Privatization and the Separation of Ownership and Control: Lessons from Chinese Ebterprise Reforms." Economics of Transition, 3.

Frydman, R., C.Gray, M.Hessel, A.Rapaczynski. (1999) "When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economics." Quarterly Journal of Economics. 114(4).

Frydman, R., A.Rapaczynski. (1994) Privatization in Eastern Europe: Is the State Withering Away? London: Central European University Press.

Frydman, R., A.Rapaczynski, J.Earle. (1993) The Privatization Process in Central Europe. London: Central European University Press.

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Sectoral Reallocation

Labor market reallocation. Endogenous capital accumulation. Optimal speed of sectoral reallocation.

Literature

Castanheira, M., G.Roland (2000) "The optimal Speed of Transition: A General Equilibrium Analysis." International Economic review, 41(1).

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Price Liberalization

Speed and methods of price liberalization. Evidences on the resistance to price liberalization. Pitfalls of partial price liberalization. Dual-track price liberalization.

Literature

Rerkowitz, D. (1996) "On the Persistence of Rationing Following Liberalization: A Theory for Economies in Transition." European Economic review< 40 (6).

Li, W. (1999) "A Tale of Two Reforms." RAND Journal of Economics, 30(1).

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Liberalization and the Output Fall

The output fall in Central and Eastern Europe. Explanation for the output fall.

Literature

Konings, J., P.Walsh (1999) "Disorganization in the Process of Transition: Firm-Level Evidence from Ukraine" Economics of Transition, 7(1).

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Financial Transition and Soft Budget Constrain

Dealing with soft budget constrains of firms. Dealing with soft budget constrains of banks. Federalism and hardening of budget constrains.

Literature

Berglof, E., G.Roland. (1997) "Soft Budget Constrains and Credit Crunches in Financial Transition." European Economic Review. 41(3-5).

Chadha, B., Coricelli. (1994). "Fiscal Constrains and the Speed of Transition." Center for Economic Policy Research Discussion Paper: 993.

Qian, Y, G.Roland (1996) "The Soft Budget Constrains in China" Japan and the World Economy, 8(1).

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Financial Repression and the Productivity of Capital

Financial deepening, real interest rates, and economic growth. The productivity of capital and saving-investment rate. Instruments of financial repression.

Literature

Carlin, W., J. Van Reenen, T.Wolfe (1995) "Enterprise Restructuring in the Transition: An Analitical Survey of the case Study Evidence from Central and Eastern Europe." Economic of Transition, 3(4).

Dewatripont, M., E.Maskin. (1995) "Credit and Efficiency in Centralized and Decentralized Economies." Review of Economic Studies, 62.

Roland G. Transition and Economics, Politics, Markets, and Firms. Cambridge, Massachusetts – London, England. MIT Press.

Macroeconomic Control During Stabilization

The inflation tax, monetary control, reserve requirements on commercial banks. Monetary stabilization problem. The indexing problem. A rational for interest rate management. Macroeconomic instability and moral hazard in banking. Stabilizing the Ruble, financial control during transition in Russia.

Literature

Bonnett, J., H.Dixon (1995). "Macroeconomic Equilibrium and Reform in a Transitional Economy." Europen Economic Review, 39 (8).

R.I.McKinnon, The Order of Economic Liberalization. Financial Control in the Transition to a Market Economy, 1991, The Johns Hopkins University Press.

International Economics and Liberalization

Foreign trade liberalization. Protectionism in foreign trade. The nonequivalence of tariffs and quotas. Negative value-added in liberalized socialist economies. Exchange Rate Policy in Repressed and Open Economy. The international capital market and economic liberalization. The over-borrowing syndrome.

Literature

Berg, A. , J.Sachs (1992). "Structural Adjustment and International Trade in Eastern Europe: The Case of Poland." Economic policy, 14.

R.I.McKinnon, The Order of Economic Liberalization. Financial Control in the Transition to a Market Economy, 1991, The Johns Hopkins University Press.

Social Trends, Household Behavior, and Social-Sector Policies

Social costs and social politics in post-communist transformations. Welfare sector reforms. Health reforms. Pension reforms.

Literature

Atkeson. A., P.J.Kehoe (1996). "Social Insurance and Transition." International Economic Review.

Commander, S., A. Tolstopiatenko, R. Yemtsov (1999). "Channels of Redistribution: Inequality and Poverty in the Russian Transition." Economics of Transition, 7(2).

Garner, T., K.Terrell (1998) "A Gini Decomposition Analysis of Inequality in the Czech and Slovak Republics during the Transition." Economics of Transition. 6(1).

Ham, J., J.Svejnar, Terrell K. (1998) "Unemployment and the Social Safety Net during the Transition to a Market Economy: Evidence from Czech and Slovak Men." American Economic review, 88(5).

Transforming Post-Communism Political Economies, 1997, National Academy Press, Washington, D.C.

Transforming the Role of the State

The state in a market economy. Democracy and social changes. The state as an ensemble of economic actors. Possible future directions for economies in transition.

Literature

Transforming Post-Communism Political Economies, 1997, National Academy Press, Washington, D.C.

Theorising Transition. The Political Economy of Post –Communist Transformation, 1998, Routledge.

IV Assessment

Examination

V Teaching Methods

Lectures



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