Economics of Transition, Microeconomic aspects of transition: Fall 2003 Lubomir Lizal
Professor: Lubomir Lizal
Office: 3
Office hours: By appointment, usually after the class, or Tue 9-12 and Fri 11-12, every second week.
Phone: 240 05 - 114
Course Outline; Readings List
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 the first semester.
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 transition field.
Grading: Grading will be based on exams , in-class and seminar paper.
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
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 1,2, 5, 6, 7, 8, and 15)
Bornstein, Morris: Comparative Economic Systems: Models and Cases. Seventh Edition, Irwin, Boston. 1994. (Chapters 1 and 2)
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.
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.
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.
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.
Investment Behavior and Soft Budget Constraints
Lizal L. and J. vejnar: 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.
Lizal L. and J. Svejnar: "Financial Conditions and
Investment during the Transition: Evidence from Czech Firms," in
Anna Meyendorff and Anjan Thakor, editors: Designing Financial Systems
in Transition Economies: Strategies for Reform
in Central and Eastern Europe, MIT Press, 2002, forthcoming (spring of
2002). Available as Working Paper of CERGE-EI
153, March 2000, The William Davidson Institute Working Paper 399, 2001.
Lizal L.: Does a Soft Macroeconomic Environment Induce
Restructuring on the Microeconomic Level during the
Transition Period? Evidence from Investment Behavior of Czech
Enterprises, Working Paper of CERGE-EI 147, June
1999, and Working Paper of WDI 235, June 1999.
Lizal L., M. Singer and A. Baghdasarian: "An
Estimation of Euler's Equation of a Profit Maximising Firm: The Case of
Czech Republic 1992-1995", in Kari Liuhto, ed.: Ten Years of Economic
Transformation, Lappeenranta University of
Technology, Lappeenranta, Finland, vol. 2, pp.126-142. Available as
CERGE DP 7/98, April 1998.
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.
Hanousek, Jan and Randall Filer, The relationship between economic factors and equity markets in Central Europe, Economics of Transition, 8 (3), 623-638, 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.
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.
Leamer, Edward A.: :Access to Western markets, and eastern effort levels, Chapter 3 in , pp. 503-526.
Monopoly Regulation and Welfare, Corruption
L. Lizal: Monopoly Regulation in the Czech Republic
and EU, CERGE-EI DP No. 1999-26, November 1999,
In Czech available as: Lizal L.: Koordinace ekonomické politiky ČR v
síových odvětvích s praxí EU [Coordination of
Czech Economic Policy in Network Industries with the EU], Finance a
úvěr, 9/2000, September, pp. 488-502.
Bergman Lars, Doyle Chris, Gual Jordi, Hultkrantz Lars, Neven
Damien, Röllner Lars-Hendrik, Waverman
Leonard (1998): Europe's Network Industries: Conflicting
Priorities, CEPR, London.
Lizal L. and E. Kocenda: State of Corruption in
Transition: The Case of the Czech Republic, Emerging Markets Review,
vol. 2 (2), 2001, pp. 138-160.
Useful Books for the sequence:
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. 7th 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.