Economics of Transition: Fall/Spring 2001/2002                                                 Lubomir Lizal

Professor: Lubomir Lizal, Jan Svejnar, Gerard Roland

Office: 310

Office hours: By appointment, usually after the class, Tue 9-12, Fri 11-12.

Phone: 240 05 - 114

Duration: The course is a standard two-semester course, two 90 minutes classes per week plus one excercise session/student seminar presentation.

Contents: Review of theoretical and empirical studies focused on economics of transition. The course is a two semestral one and this syllabus covers both semesters.

Preliminary requirements: Microeconomics, Basic Econometrics

Recommended complementary courses: Industrial Organization, Econometrics

Requirements: The course will typically consist of traditional lectures and seminar/visiting speaker per week. Lectures will cover up to date papers as well as classical treatments of related topics. There is one midterm and final exam. The students will be asked to prepare presentation of a relevant paper from the trasition field.

Grading: Grading will be based on exams , in-class and seminar paper.

A. Microeconomic aspects of transition and background literature

(i) Models of Planned Economies - Classical Literature

a) Literature of a standard view of elementary theory of planning, pre-requisite readings:

Ward, Benjamin: The socialist economy. Berkeley, University of California Press, 1967

Hayek, F.A. (ed): Collectivist Economic Planning. London, Routledge, 1935

Lange, Oskar, and F.M. Taylor (eds): On the Economic Theory of Socialism. Minneapolis: University of Minnesota Press (Reprinted, NY: McGraw-Hill, 1964)

The New Palgrave: Problems of the planned economy

Kowalik, T.: Lange Lerner mechanism

Vohra, R.: Planning

b) Producer in Planned Environment

Abel, Istvan and John P. Bonin (1990): Behavior of the Socialist firm under Indirect Control. In: Quandt and Triska: Optimal Decisions in Markets and Planned Economies. Westview Press, 1990

Portes, Richard D.: The enterprise under central planning. The Review of Econ. Studies, 36, 1969, no. 2, pp. 197 - 212

Kornai, Janos (1986): The Soft Budget Constraint. Kyklos-Malinvaud

Hlavacek, Jiri (1990): Producer's Criteria in a Centrally Planned Economy. In: Quandt and Triska.

(ii) Labor managed firm

Ward, Benjamin (1958): The Firm in Illyria: Market Syndicalism, American Economic Review, 566-89; or chapters 8 - 10 in Ward.

Domar, Evsey (1966)" The Soviet Collective Farm as a Producer Cooperative. American Economic Review, 734-757

Prasnikar, J., J. Svejnar, D. Mihaljek and V. Prasnikar (1994): Behavior of Participatory Firms in Yugoslavia: Lessons for Transforming economies. Review of Economics and Statistics, 728-740

Spinnewyn, Frans and Jan Svejnar (1990): Optimal Membership, Employment, and Income Distribution in Unionized and Labor Managed Firms. Journal of Labor Economics, 317-340

Estrin, Saul and Jan Svejnar (1993): Wage Determination in Labor-Managed Firms under Market-Oriented Reforms: Estimates of Static and Dynamic Models. Journal of Comparative Economics, 687-700

*Svejnar, J.: Bargaining Power, Fear of Disagreement and Wage Settlements: Theory and Evidence from U.S. Industry, Econometrica, 54 (5):1055-78, 1986.

Bonin, J., D. Jones, and L. Putterman: Theoretical and Empirical Studies of Producer Cooperative: Will Ever the Twin Meet? Journal of Economic Literature, 31 (3), 1993.

(iii) Structure of the firm

Hart, Oliver and John Moore (1990): Property Rights and the Nature of the Firm, Journal of Political Economy, 98(6), pp. 1119-1158.

Grossman, Sanford and Oliver Hart (1986): The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration, Journal of Political Economy, 94(4), pp. 691-719 (supplementary reading to Hart and Moore 1990)

Alchian, Armen A. and Harold Demsetz (1972): Production, Information Costs and Economic Organization. American Economic Review, 62(5), pp. 777-795

Furubotn, Eirik G. and Svetozar Pejovich (1972) Property Rights and Economic Theory: A Survey of Recent Literature. Journal of Economic Literature, pp. 1137-1162.

Weitzman, Martin L. (1974): Prices versus Quantities. Review of Economic Studies, vol. 4, 477 - 491

Bonin, John (1976): On the design of Managerial Incentive Structures in a Decentralized Environment. AER, 66(4), pp. 682-687.

Kornai, Janos (1979): Resource Constrained versus Demand Constrained Systems. Econometrica

Weitzman, Martin L. (1980): The Ratchet Principle and Performance Incentives, Bell Journal of Economics, 11(1), pp 302

Keren, Michael, Jeffrey Miller and James R. Thornton (1983): The Ratchet: A Dynamic Managerial Incentive Model of the Soviet Enterprise. Journal of Comparative Economics, 7(4)

Tirole, Jean (1988): The Theory of Industrial Organization. MIT Press

(iv) Preprivatization Behavior, Privatization and Restructuring

Li, David D. and Francesca Cornelli (1995): Enterprise Behavior Before Restructuring, unpublished manuscript

Cornelli, F. and D. Li: Optimal Privatization with Large Shareholders, working paper, University of Michigan, 1993.

Aghion, Philippe, Olivier Blanchard and John Burgess (1994): The Behaviour of State Firms in Eastern Europe Pre-Privatization. European Economic Review, 1327-1349

Lizal, Lubomir, Miroslav Singer and Jan Svejnar (1995): Manager Interests, Breakups and Performance of State Enterprises in Transition. In: Svejnar, Jan (ed.): The Czech Republic and Economic Transition in Eastern Europe. Academic Press

*Lizal, Lubomir, Miroslav Singer and Jan Svejnar, Enterprise Break-ups and Performance in Transition, in the Review of Economics and Statistics, February 2001.

Kotrba, Josef (1996): Privatization and Restructuring: Friends or Enemies, CERGE-EI WP #103.

Pinto, Brian, Marek Belka and Stefan Krajewski (1993): Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms. Brooking Papers on Economic Activity

Estrin, Saul and Paul Hare (1992): Firms in Transition: Modelling Enterprise Adjustment. CEPR Working Paper No. 89

Carlin, Wendy, John van Reenen and Toby Wolfe (1994): Enterprise Restructuring in the Transition: an Analytical Survey of the Case Study Evidence from Central and Eastern Europe. EBRD Working Paper No. 14

*Barberis, N., M. Boycko, A. Shleifer, and N. Tsukanova: How Does Privatization Work? Evidence from the Russian Shops , Journal of Political Economy, 1996.

*Frydman, R., C. Gray, M. Hessel, and A. Rapaczynski: When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies, Quarterly Journal of Economics, CXIV(4), 1153-1192, 1999.

*Gupta, N., J. Ham and J. Svejnar: Priorities and Sequencing in Privatization: Theory and Evidence from the Czech Republic, The William Davidson Institute Working Paper No. 323, 2000.

*Djankov, Simeon and Peter Murrell, Enterprise Restructuring in Transition: A Quantitative Survey, Mimeo, November 2000.

Laffont, J.J. and J. Tirole: Privatization and Incentives, Journal of Law, Economics, and Organization, 7, 84--105, 1991.

Shleifer, A. and R. Vishny: Politicians and Firms, Quarterly Journal of Economics, 439, 1994.

Schmidt, K. and M. Schnitzer: Privatization and Management Incentives in Transition Period in Eastern Europe, Journal of Comparative Economics, 17, 1993.

Blanchard, O. and P. Aghion: On Insider Privatization , mimeo, 1995.

(iv) Privatization: Practical Issues

Boycko, Maxim, Andrei Schleifer and Robert Vishny (1994): Voucher Privatization. Journal of Financial Economics, 35(2), pp. 249-266.

Boycko, M., A. Shleifer and R. Vishny: Privatizing Russia , Brookings Papers on Economic Activity, winter, 1993.

Winiecki, Jan (1994): Polish Mass Privatization Programme: The Unloved Child in a Suspected Family. Adam Smith Research Centre Working Paper

Kotrba, Josef and Jan Svejnar (1994): Rapid and Multifaceted Privatization: The Case of Czech and Slovak Republics. Moct-Most 4: 147-185

Svejnar, Jan and Miroslav Singer (1994): Using Vouchers to Privatize and Economy: The Czech and Slovak Case. Economics of Transition 2, 43-64

Carlin, Wendy and Colin Mayer (1995): Structure of Ownership of East German Enterprises. CERGE Discussion Paper No. 51

Stiglitz, J.E.: Theoretical Aspects of the Privatization: Applications to Eastern Europe, Working Paper, Institute for Policy Reform, Stanford University, 1991.

(v) Side Effects of Privatization; Privatization and Public Sector

Witzum, Amos: Privatization, distribution and economic efficiency in transition

Laffont, Jean-Jacques and Jean Tirole (1991): Privatization and Incentives. Journal of Law, Economics and Organization 7, 84-105

Turnovec Frantisek (1999): Privatization, ownership structure and transparency: How to measure the involvement of the state, European Journal of Political Economy, vol. 15, pp 605-618.

Kočenda, E. (1999): Residual State Property in the Czech republic. Eastern European Economics, 37, 1999, 5, 6-35.

(vi) Entrepreneurs and New Firms

*Johnson, Simon, John McMillan and Christopher Woodruff , Entrepreneurs and the ordering of institutional reform, Economics of Transition, 8 (1), 1-36, 2000.

Bratkowski, Andrzej, Irena Grosfeld and Jacek Rostowski , Investment and finance in de novo private firms, Economics of Transition, 8 (1), 101-116, 2000.

*Pissarides, Francesca, Miroslav Singer and Jan Svejnar , Objectives and Constraints of Entrepreneurs: Evidence from Small and Medium Size Enterprises in Russia and Bulgaria, The William Davidson Working Paper No. 346, October 2000.

(vii) Firms and the Banking Sector

Dittus, Peter (1994):Bank Reform and Behavior in Central Europe. JCE 19,335-361

van Wijnbergen, Sweder (1994): On the Role of Banks in Enterprise Restructuring: The Polish Example

Bonin, John (1995): Banking in the Transition: Privatizing banks in Hungary, Poland, and the Czech Republic.

Varhegyi, Eva (1993): Key elements of the Reform of the Hungarian Banking System: Privatization and Portfolio Cleaning

Grosfeld, Irena (1994): Financial Systems in Transition: Is there a Case for a Bank Based System? CEPR Working Paper No. 1062

Tirole, Jean (1995): Western Prudential Regulation: Assessment and Reflections on its Application to Central and Eastern Europe. Economics of Transition

(viii) Principal Agent Problems in (Post) Transformation Economies

Li, David D. and Francesca Cornelli (1994): Large Shareholders, Private Benefits and Optimal Schemes for Privatization. CEPR Working Paper No. 891

Admati, Anat R., Paul Pfleiderer and Josef Zechner (1994): Large Shareholder Activism, Risk Sharing and Financial Market Equilibrium. JPE 102, 1097-1130

Stark, David and Laszlo Bruszt (1995): Network Properties of Assets and Liabilities: Patterns of Inter-Enterprise Ownership in the Post-socialist Transformation

Stark, David (1994): Recombinant Property in East European Capitalism

Abel, Istvan and Konstantine Gatsios (1993): The Economics of Bankruptcy and the Transition to a market economy

Legros, Patrik and Janet Mitchell (1995): Bankruptcy as a Control Device in Economies in Transition, Journal of Comparative Economics, pp. 265-301.

B. Macroeconomic aspects of transition, trade and labor issues

1. Background to Central Planning and Transition

*Gregory, Paul and Robert Stuart: Comparative Economic Systems. Fourth Edition, Houghton Mifflin Company, Boston, 1992. (Chapters 1, 2 and 15)

*EBRD (European Bank for Reconstruction and development) , Progress and patterns in transition, Transition report 2000, pp. 13-29, 49-51, and 53-54.

Stiglitz, Joseph E., Whither Socialism? Cambridge, MA: MIT Press, 1994.

Kornai, Janos: Socialist Systems. Princeton University Press, 1992.

2. Traditional Topics of Comparative Economics

Koopmans, T.C. and J.M. Montias, On the Description and Comparison of Economic Systems, in A. Eckstein ed., Comparison of Economic Systems, University of California Press, 1971, 27-78

Gregory, Paul and Robert Stuart: Comparative Economic Systems. Fourth Edition, Houghton Mifflin Company, Boston, 1992. (Chapters 5, 6, 7, and 8)

Bornstein, Morris: Comparative Economic Systems: Models and Cases. Seventh Edition, Irwin, Boston. 1994. (Chapters 1 and 2)

2.1 Plan versus Market: Theoretical Discussions

Hurwicz, L.: The Design of Mechanisms for Resource Allocation, American Economic Review, 1973.

*Manove, M.: A Model of Soviet-Type Planning, American Economic Review, 1971.

Weitzman, M.L.: Price vs. Quantities, Review of Economic Studies, 41, 1974, 477-491.

Ludwig von Mises: Economic Calculation in Socialism , in Bornstein, Morris: Comparative Economic Systems: Models and Cases. Seventh Edition, Irwin, Boston. 1994.

Heal, Geoffrey M., The Theory of Economic Planning, Noth Holland, Ch. 1-6.

2.2. Incentive Problems in Socialist Systems

Dewatripont, Mathias and Eric Maskin. 1995. Credit and Efficiency in Centralized and Decentralized Economies. Review of Economic Studies, 62, 541-556. July 1995.

Weitzman, M., The Ratchet Principle' and Performance Incentives, Bell Journal of Economics, 22(1):302, 1980.

Bonin, J., On the Design of Managerial Incentive Structure in a Decentralized Planning Environment, American Economic Review, 66 (4), 1976.

2.3 Shortages and Rationing

*Shleifer, A. and R. Vishny: Pervasive Shortages under Socialism, Rand Journal of Economics, 23 (2) 1992.

Portes, R. and D. Winter: Disequilibrium Estimates for Consumption Goods Markets in Centrally Planned Economies, Review of Economic Studies. 1980.

Qian, Y.: A Theory of Shortages in Socialist Economies Based on the `Soft Budget Constraint' , American Economic Review, 84 (1), 1994.

2.4 The Labor-Managed Firm and Worker Participation

Weitzman, M.: The Simple Macroeconomics of Profit Sharing, American Economic Review, 75, 1985.

2.5 A Positive Political Economy Approach to Socialist Systems

Kornai, J.: The Economics of Shortage. North-Holland, 1980. (Chapters9, 13, 14, and 22.)

Kornai, J.: The Socialist System: A Political Economy Approach. Princeton University Press, 1992. (Chapter 6, 7, 15, and 21.)

3. Major Issues of Transition

3.1 Price Liberalization, Macroeconomic Stabilization and Output Fall

*Roland, Gerard: Understanding Transition, Transition and Economics, MIT Press, 2000, Chapter 1, pp. 1-22.

*Roland, Gerard: Liberalization and Output Fall, Transition and Economics, MIT Press, 2000, Chapter 2, pp. 153-170.

*Berg, A., E. Borensztein, R. Sahay, and J. Zettelmeyer: The Evolution of Output in Transition Economies: Explaining the Differences, Nobel Symposium, September 1999.

*Blanchard, Olivier and Michael Kremer, Disorganization, Quarterly Journal of Economics, 112(4), 1091-1126, Nov. 1997

*Roland, Gerard and Thierry Verdier, Transition and the Output Fall, Economics of Transition, vol. 1, 1999, 1-28.

Olivier Blanchard, The Economics of Post-Communist Transition, Oxford: Oxford University Press, 1997, Ch. 1-2, pp. 1-56.

Kornai, J.: Transformational Recession: The Main Causes , Journal of Comparative Economics, 19 (1), 1994.

Berkowitz, Daniel, David DeJong and Steven Husted, Transition in Russia: It's Happening, The William Davidson Institute Working Paper No. 33, February 1997.

Cochrane, J. and B. Ickes: Inflation Stabilization in Reforming Socialist Economies: The Myth of the Monetary Overhang, Comparative Economic Studies, 33 (2), 97-122, 1991.

Bennett, J. and H.D. Dixon: Macroeconomic Equilibrium and Reform in a Transition Economy, European Economic Review, 39 (8), 1465--85, 1991.

Calvo, G.A. and C.A. Vegh: Stabilization Dynamics and Backward-looking Contracts, Journal of Development Economics, 43 (1), 59--84, 1994.

3.2: Reforms and Behavior of State Owned Enterprises

*Roland, Gerard: The Political Economy of Mass Privatization, Transition and Economics, MIT Press, 2000, Chapter 4, pp. 85-105.

*Roland, Gerard: The Optimal Speed of Sectoral Reallocation, Transition and Economics, MIT Press, 2000, Chapter 5, pp. 109-129.

Olivier Blanchard, The Economics of Post-Communist Transition, Ch. 3-4, pp. 61-127.

Employment and Productivity

*Bai, C., D. Li, and Y. Wang: Enterprise Productivity and Efficiency: When Is Up Really Down? , Journal Comparative Economics, 24 (2), 265-280, 1998.

*Basu Swati, Saul Estrin and Jan Svejnar, Employment and Wage Behavior of Enterprises in Transitional Economies, The William Davidson Institute Working Paper No. 114, Oct. 1997 (revised, January 1999)

Grosfeld, Irena and Francois Nivet, Firms' Heterogeneity in Transition: Evidence from a Polish Data Set, The William Davidson Working Paper No. 47, May 1997.

*Lee, Young, Wages and Employment in China's SOEs, 1980-1994: Corporatization, Market Development and Insider Forces Journal of Comparative Economics, 27(4), 702-29, Dec.1999.

Spinnewyn, Frans and Jan Svejnar, The Efficiency of Wage-Employment Bargains in a Consistent Dynamic Framework, Mimeo, University of Michigan, December 1998.

Investment Behavior, Financial Sector Development and Soft Budget Constraints

*Roland, Gerard: The Soft Budget Constraint and Financial Transition, Transition and Economics, MIT Press, 2000, Chapter 12, pp. 287-325.

*Mitchell, Janet, Theories of soft budget constraints and the analysis of banking crises, Economics of Transition, 8 (1), 59-100, 2000.

Weller, Christian and Bernard Morzuch, International financial contagion: Why are Eastern Europe's banks not failing when everybody else's are? Economics of Transition, 8 (3), 639-663, 2000.

Ericson, Richard E., Restructuring Investment in Transition: A Model of the Enterprise Decision, The William Davidson Institute Working Paper No. 129, Jan. 1998.

*Lizal L. and J. Švejnar: Investment, Credit Rationing and the Soft Budget Constraint: Evidence from Czech Panel Data, Review of Economics and Statistics, forthcoming, 2002. Available as: Investment, Credit Rationing, and the Soft Budget Constraint: Evidence from Czech Panel Data, The William Davidson Institute Working Paper of WDI 363, 2000.

*Anderson, Ronald and Chantal Kegels, Finance and Investment in Transition: Czech Enterprises, 1993-94, The William Davidson Institute Working Paper No. 164, Sept. 1997.

*Prasnikar, Janez and Jan Svejnar, Investment and Wages During the Transition: Evidence from Slovene Firms, The William Davidson Institute Working Paper No. 184, July 1998.

Rockinger, Michael and Giovanni Urga, The Evolution of Stock Markets in Transition Economies, Journal of Comparative Economics, 28(3) 456-472, Sept. 2000.

Hanousek, Jan and Randall Filer, The relationship between economic factors and equity markets in Central Europe, Economics of Transition, 8 (3), 623-638, 2000.

Brandt, Loren and Xiaodong Zhu, Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform, Journal of Political Economy, 108 (2), 422-439, April, 2000.

Frydman, Roman, Cheryl Gray, Marek Hessel, and Andrzej Rapaczynski , The limits of discipline: Ownership and hard budget constraints in the transition economies, Economics of Transition, 8 (3), 577-601, 2000.

3.3 Labor Market and Income Distribution

Human Capital

*Munich, Daniel, Jan Svejnar and Katherine Terrell, Returns to Human Capital under the Communist Wage Grid and during the Transition to a Market Economy: Retrospective Evidence from Czech Micro Data, Working Paper No. 272, The William Davidson Institute, University of Michigan Business School, December 1999.

Chase, Robert S., Markets for Communist Human Capital: Returns to Education and Experience in Post-Communist Czech Republic and Slovakia, Industrial and Labor Relations Review, 51(3), April 1998, 401-423.

*Brainerd Elizabeth, Winners and Losers in Russia's Economic Transition, American Economic Review, 88(5) December 1998, 1094-1116.

Labor Mobility

*Sorm, Vit and Katherine Terrell, Sectoral Restructuring and Labor Mobility: A Comparative Look at the Czech Republic, Journal of Comparative Economics, 28(3) 431-455, Sept. 2000.

*Sabirianova, Klara, The Great Human Capital Reallocation: An Empirical Analysis of Occupational Mobility in Transitional Russia, The William Davidson Institute Working Paper No. 309, 2000.

*Munich, Daniel, Jan Svejnar and Katherine Terrell, Worker Mobility and Wage Gains during the Transition, Mimeo, The William Davidson Institute, December 2000.

*Jurajda, Stepan and Katherine Terrell, Job Creation and Job Destruction during the Transition, Mimeo, Davidson Institute, 2000.

*Bilsen, Valentijn and Jozef Konings, Job Creation, Job Destruction and Growth of Newly Established, Privatized and State-Owned Enterprises in Transition Economies: Survey Evidence from Bulgaria, Hungary and Romania, Journal of Comparative Economics, 26(3), September 1998, 429-445.

Income Distribution and Welfare

*Garner, Thesia and Katherine Terrell, Changes in Distribution and Welfare in Transition Economies: Market vs. Policy in the Czech Republic and Slovakia, Economics of Transition, 6(1), 1998.

*Commander, Simon, Andrei Tolstopiatenko and Ruslan Yemtsov , Channels of Redistribution: Inequality and Poverty in the Russian Transition, Economics of Transition, 7(1), 1998.

Lokshin, Michael and Martin Ravallion, Welfare impacts of the 1998 financial crisis in Russia and the response of the public safety net, Economics of Transition, 8(2), 269-295, 2000

Unemployment

*Munich, Daniel, Jan Svejnar and Katherine Terrell, Worker-Firm Matching in the Transition: (Why) Were the Czechs More Successful than Others? The William Davidson Institute Working Paper No. 107, Revised, December 2000.

*Ham, John C., Jan Svejnar and Katherine Terrell, Unemployment and the Social Safety Net During Transitions to a Market Economy: Evidence from the Czech and Slovak Republics, American Economic Review, 88(5) December 1998, 1117-1142.

*Ham, John C., Jan Svejnar and Katherine Terrell, Factors Affecting Women's Unemployment During the Transition in the Czech and Slovak Republics, Economics of Transition, 7(1) 1999, 47-78.

Foley, Mark, Determinants of Unemployment Duration in Russia, The William Davidson Institute Working Paper No. 81, Aug. 1997.

*Boeri, Tito and Christopher Flinn, Returns to Mobility in the Transition to a Market Economy, The William Davidson Institute Working Paper No. 108, Nov. 1997.

*Lehmann, Hartmut, Jonathan Wadsworth and Alessandro Acquisti , Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation, Journal of Comparative Economics, 27(4) 595-617, Dec. 1999.

3.4. Reforming International Trade

*Repkin, Alexandre and Patrick P. Walsh, Evidence of European Trade and Investment U-Shaping Industrial Output in Bulgaria, Hungary, Poland, and Romania, Journal of Comparative Economics, 27(4), 730-52, Dec. 1999.

*Yener Kandogan, University of Michigan, PhD. Thesis 2001

*Hillman, A.: The Transition from the CMEA System of International Trade , in Keren, M. and G. Ofer eds.: Trials of Transition, Westview Press, 1992.

Murphy, Kevin M. and Shleifer, Andrei: Quality and Trade , Journal of Development Economics; 53(1), June 1997, pages 1-15.

*Leamer, Edward A.: :Access to Western markets, and eastern effort levels, Chapter 3 in …, pp. 503-526.

Williamson, Jeffery: The Economic Opening of the Eastern Europe , pp.15 ---54, Institute for International Economics, Washington, DC, 1991.

Li, David and Qi Chen: Why Aren't Foreign Direct Investments Always Welcome? mimeo, University of Michigan, 2000.

Feenstra, Robert: Foreign Direct Investment: Myths and Facts , mimeo University of California at Davis, Working Paper, 1998.

Staiger, R.: A Theory of Gradual Trade Liberalization , mimeo, University of Wisconsin, 1993.

3.5. Reforming Public Finance and the Government

*Qian, Y., G. Roland and C. Xu, Coordinating Changes in M-Form and U-Form Organizations, Mimeo, ECARE, Brussels, 1998.

*Gordon, Roger and David Li: Taxes and Government Incentives: Eastern Europe versus China, CEPR Working Paper, 1997.

*Gordon, Roger, Chong-en Bai, and David D. Li: Efficiency Losses from Tax Distortions vs. Government Control. European Economic Review, 43(4-6), 1999, pp. 1095-1103.

McKinnon, R.: Taxation, Credit, and Money in a Liberalizing Socialist Economy , in Clague, C. and G. Rausser (eds): The Emergence of Market Economies in Eastern Europe, Blackwell, 1992.

Che, Jiahua and Yingyi Qian: Insecure Property Rights and Government Ownership of Firms. Quarterly Journal of Economics. May 1998, 467-96.

*Qian, Yingyi and Barry Weingast. Federalism as a Commitment to Reserving Market Incentives. Journal of Economic Perspectives. Fall 1997, pages 83-92.

Qian, Yingyi and Gerard Roland, Federalism and the Soft Budget Constraint, American Economic Review, 88(5) December 1998, 1143- 1162.

Frye, Timothy and Andrei Shleifer. The Invisible Hand and the Grabbing Hand. American Economic Review. May 1997, pages 354-58.

Li, David. Changing Incentives of the Chinese Bureaucracy. American Economic Review. May 1998.

*Basu, Susanto and David D. Li, Corruption in Transition, The William Davidson Institute Working Paper No. 161, May 1998.

Li, David D., A Theory of Ambiguous Property Rights in Transition Economies: The Case of the Chinese Non-State Sector, Journal of Comparative Economics, 23(1), Aug. 1996, 1-19.

Shleifer, A.: Government in Transition, mimeo, 1996.

*Li, David D.: Costs and Benefits of Government Control during Transition: Evidence from China's State Enterprises , mimeo, 1996.

Berkowitz, Daniel and Wei Li, Tax Rights in Transition Economies: A Tragedy of the Commons, The William Davidson Institute Working Paper No. 45a, Sept. 1997, forthcoming in Journal of Public Economics.

*Shleifer, A. and R. Vishny: Corruption , Quarterly Journal of Economics, 1993.

3.6 Speed and Methods of Reform

*Roland, Gerard: Speed and Methods of Price Liberalization, Transition and Economics, MIT Press, 2000, Chapter 6, pp. 131-152.

*Katz, Barbara and Joel Owen, Choosing between Big-Bang and Gradualist Reform: An Option Price Approach, Journal of Comparative Economics, 28(1), 95-107, March 2000.

*Dewatripont, M. and G. Roland: Economic Reform and Dynamic Political Constraints, Review of Economic Studies, 59 (4), 703-730, 1992.

Wei, Shang-jin. Gradualism versus Big Bang: Speed and Sustainability of Reforms. Canadian Journal of Economics; 30(4), November 1997, pages 1234-47.

Murrell, P. and Y. Wang: When Privatization Should be Delayed: The Effect of Communist Legacies on Organizational and Institutional Reforms, Journal of Comparative Economics, v. 17, 1993.

*Murphy, K., Shleifer, A., and R. Vishny: Pitfalls of Piecemeal Reform, Quarterly Journal of Economics, 1993.

*Lau, Lawrence, Yingyi Qian, and Gerard Roland. Reform without Losers: An Interpretation of China's Economic Reform. Journal of Political Economy, 108(1), pp. 120-163, 2000.

Alesina, A. and A. Drazen: Why Are Stabilization Delayed? The American Economic Review, 81 (5), 1171--88, 1991.

*Dewatripont, M. and G. Roland: The Virtues of Gradualism and the Legitimacy in the Transition to a Market Economy, The Economic Journal, 102, pp.291-300, 1992.

Useful Books for both sequences:

Salvatore Zecchini, 1997, Lessons from the Economic Transition: Central and Eastern Europe in the 1990s.OECD-Kluwer Academic Publishers.

Gerard Roland, Transition and Economics, MIT Press, 2000.

Gregory, Paul and Robert Stuart: Comparative Economic Systems. Fourth Edition, Houghton Mifflin Company, Boston, 1992.

Kornai, Janos: The Socialist System: A Political Economy Approach. Princeton University Press, 1992.

Kornai, J.: The Economics of Shortage. North-Holland, 1980.

Bornstein, Morris: Comparative Economic Systems: Models and Cases. 7^th Ed., Irwin, Boston. 1994.

Heal, Geoffrey M., The Theory of Economic Planning, Noth Holland.

Olivier Blanchard, The Economics of Post-Communist Transition.

Marie Lavigne, The Economics of Transition, NY, London, 1995.

Daniel Gros and Alfred Steinherr, Winds of Change, NY, London, 1995

Note:

The reading list can be updated during the semester in order to accommodate the needs of the course and/or to reflect recent developments in the literature on transition.