Events
Chapter 13: Political Economy of Transition Reforms
The chapter discusses the political economy of transition from plan to market. We start with the political economy before transition when powerful vested interests delayed necessary reforms thus leading to the bankruptcy of the communist regimes. We then move to the political economy of early transition reforms and explain the divergence in the design and the outcomes of those reforms across the transition region. Next, we explain the rise in inequality and respective anti-reform backlash that was observed in many transition countries. We conclude with the analysis of today’s political economy analysis and implications for future reformers.
Chapter 14: The EU Anchor Thesis: Transition from Socialism, Institutional Vacuum and Membership in the European Union
One of the clearest stylised facts of the transition is also one of the most unexpected: after 1989 Central and Eastern European and the former Soviet Union countries diverged massively. Institutions are a main reason. The European Union (EU) anchor thesis posits that the prospect of membership in the EU played a key role in filling in the institutional vacuum that followed the collapse of socialism. This chapter examines this thesis and assesses the relevant bodies of evidence, focusing on whether the prospect of EU membership accelerated institutional development and, if so, whether this was indeed associated with improved economic outcomes.
Chapter 18: Institutions, Human Capital and Economic Growth
Economists and social scientists have long debated the relative importance of institutions and human capital as fundamental determinants of long-run development. After discussing some of the limitations of the existing literature, we use panel data covering the period 1955–2010 and a novel indicator of property rights protection from Varieties of Democracy (V-Dem) to reinvestigate these relationships. We find that both property rights institutions and human capital are positively related to economic growth, although human capital is relatively more robust when we account for country fixed effects. We also investigate whether the growth effects of property rights institutions are heterogeneous across different levels of development. In contrast to the cross-country evidence, our panel data results suggest that broad-based property rights protection clearly and strongly enhances growth only in advanced economies.
Chapter 19: Reform Design Matters: The Role of Structural Policy Complementarities
In this chapter, we discuss possible interactions across structural policy domains. While relatively more studied in the context of the post-communist transition literature, our survey suggests that relationships of this type hold more generally and can be important to improve our understanding of the relationship between structural reforms and long-run economic growth. Given its potential relevance for the design of successful reform packages, exploring in a more exhaustive way the notion that the effect of a given reform on economic growth depends on the progress made in other policy areas should be a priority point for future research. This may be particularly relevant to help unlock the growth potential of many developing and emerging countries, namely concerning their integration in the global economy.
Chapter 20: Democracy as a Driver of Post-Communist Economic Development
This study revisits the potential effect of democracy on economic development in a broad sample of countries, and also separately in a subsample of post-communist countries. The results are reassuring: democracy has a robustly positive impact on economic growth, and also on key factors of economic growth—investment in physical and human capital. Moreover, the sustained level of democracy, embodied in accumulated democratic capital, especially robustly correlates with economic development. When comparing the relative roles of democracy and economic freedom, democracy takes primacy in the global sample while both democracy and economic freedom seems to play important roles in the subsample of post-communist countries.
Chapter 25: Growth and Subjective Well-Being in China
China has not experienced subjective well-being prosperity since 1990 despite its unprecedented economic growth in the period. This chapter summarizes a few prior studies of subjective well-being trends in urban China since 1990 and expands on rural well-being in 2000s when data are available. The urban well-being has substantially declined since 1990 with a mild recovery starting in the early 2000s. The rural well-being, consistent with urban, has been climbing up in the 2000s. Both macro- and micro-level data corroborate that material wealth fails to ensure urban subjective well-being over time and factors such as labor market strength, social safety net generosity, and social comparisons are more important in determining the well-being. Suggestive evidence endorses a similar story for rural well-being in China.
Chapter 27: Inequality and Well-Being in Transition: Linking Experience and Perception to Policy Preferences
The chapter discusses the political economy of transition from plan to market. We start with the political economy before transition when powerful vested interests delayed necessary reforms thus leading to the bankruptcy of the communist regimes. We then move to the political economy of early transition reforms and explain the divergence in the design and the outcomes of those reforms across the transition region. Next, we explain the rise in inequality and respective anti-reform backlash that was observed in many transition countries. We conclude with the analysis of today’s political economy analysis and implications for future reformers.
Chapter 29: Does Emigration Affect Political and Institutional Development in Migrants’ Countries of Origin?
Recent literature suggests that emigration can affect political and institutional outcomes (voting in elections, government accountability, voting for pro-democratic parties, prevalence of democracy, involvement in and tolerance of corrupt exchanges etc.) in the migrants’ countries of origin. This chapter outlines the conceptual channels through which emigration may affect institutional quality back home, highlighting Hirschman’s model of ‘Exit and Voice’, Levitt’s ‘Social Remittances’ hypothesis, and explanations related to the receipt of monetary remittances. It then reviews the growing empirical literature on the question. A common finding emerging from empirical analyses is that migrants going to countries with better governance are more likely to have a positive effect on the institutional quality back home. The chapter concludes by identifying gaps and suggesting directions for future research.
Chapter 33: Taxonomies and Typologies: Starting to Reframe Economic Systems
We propose that it is an important ongoing research agenda to devise a new classification of economic systems based on empirical observation rather than abstract reasoning, and then subject this to the test of empirical validity by exploring whether this taxonomy explains observed behaviour. However, we do not ourselves yet attempt a new classification of economic systems; rather, we draw on the Varieties of Institutional Systems configuration (Fainshmidt, Judge, Aguilera and Smith, 2018) as the basis for our empirical work. We ask whether, holding country-specific institutional factors, sector-specific technological characteristics and ownership-specific firm-level attributes constant, enterprise performance is contingent on the configuration. We test this idea on the World Bank Enterprise Survey of 30,000 firms in more than 57 countries between 2006 and 2016, using a production function methodology. Our proposition that taxonomic systems matter is supported by the evidence. We find that in these understudied economies, systems based on both free market logic and state capitalism achieve equivalent firm-level performance, while systems allowing rent-seeking and cronyism are less efficient. Thus, this new approach allows for system equivalence (equifinality) as well as system superiority.
Chapter 35: The Challenge of Identification and the Value of Descriptive Evidence
This chapter reviews a number of issues of measurement and methodology that arise in comparative economics. There is a view in economics that the most interesting research in social science is about questions of cause and effect. However, identifying causal relationships poses major difficulties, since the just-identifying restrictions required are non-testable. Given these difficulties, descriptive statistics are not only a pre-requisite for identification of causal relationships but valuable in their own right. The comparative dimension also helps in constructing data-driven counterfactuals such as those produced by the synthetic control method and the panel data approach for evaluating the effect of major systemic changes. This chapter concludes on the benefits of methodological pluralism.