32187 - Political Economy of Transition

Academic Year 2013/2014

  • Docente: Hartmut Lehmann
  • Credits: 8
  • SSD: SECS-P/02
  • Language: English
  • Teaching Mode: Traditional lectures
  • Campus: Forli
  • Corso: Second cycle degree programme (LM) in International relations and diplomatic affairs (cod. 8783)

Learning outcomes

The student is expected to be able to analyze the political economy of reform in countries of Central and Eastern Europe, with a focus on both theoretical and empirical studies. The student will get an understanding of the main challenges facing policy makers, firms and workers during transition.

Course contents

Topics covered: 

Topic 1: Central Planning and Market Socialism

The basic elements of the Classical Planning System (CPS) in the Soviet Union with an emphasis on the inner contradictions and the inefficiencies at the macro and particularly the micro level leading to decline and eventual collapse of the system. We will also look at why efforts to reform the system from within, generating “Market Socialism” were not successful.

Topic 2: General Sequencing of Reforms and Their Success

      

Here we look at which reforms should be tackled first and which later. Also, which benefits arise from a Big Bang Approach compared to a Gradualist Approach? Ten years after beginning of transition, have reforms been a failure or a success?

Topic 3: Privatization, Restructuring and Corporate Governance

Has privatization led to speedy restructuring and better corporate governance? Is privatization an important precondition for better economic performance?

Topic 4: Stabilization and Growth in Transition

Most transition economies have experienced serious bouts of inflation or hyperinflation with the onset of reforms. The various channels of inflation and methods to stop inflation will be discussed. What do we know about the determinants of growth in transition?

Topic 5: Divergent Labor Market Adjustments in Central Europe and CIS

Here, we first look at a simple model of labor reallocation from the declining to expanding sectors during transition and provide some empirical evidence of how the labor force, employment and unemployment evolve over time in the two regions mentioned. We then contrast two prototypes of labor market adjustment: “quantity adjustment”, which is primarily observed in CEE, and “price adjustment”, which is prevalent in CIS countries. Finally, we investigate the factors that might drive the different adjustment mechanisms.

Topic 6. Job Creation and Job Destruction in Transition Countries 

Since transition economies have to reallocate jobs on a massive scale, it seems natural to analyze where jobs are destroyed and created in transition countries. Which sectors of the economy and which ownership types have the largest job destruction or job creation rates? Do we observe “Schumpeterian” creative destruction in so far as the released resources are employed in more productive activities or do we observe a slide into prolonged recessions brought on by job destruction? Studies on job creation and job destruction in mature capitalist economies find tremendous heterogeneity in gross job flows within narrow sectors of the economy indicating that within-sector job reallocation is much more important than between-sector job reallocation. Do we observe similar patterns in transition economies?

Topic 7: Labor Market Policies in CEE Economies: Their Rationale and Evaluation

Most transition economies have introduced passive labor market policies (PLMP), mainly consisting in unemployment benefits, on the one hand, and active labor market policies (ALMP), i.e. job brokerage, training, wage subsidy and direct employment measures, on the other. First, we will briefly survey the economic reasons for PLMP and ALMP, as they have been applied in OECD countries over the last decades. Then we will describe the main trends in expenditures on PLMP and ALMP in CEE countries and will discuss the applicability of OECD-type policies to this group of countries. Finally, we will look at the efficacy of these policies citing examples from the evaluation literature for Poland and Slovenia.

Topic 8: Understanding informal employment in transition: A comparative perspective.    

Using a seminar format, this section presents the results of research done by myself and international partners on the issue of informal employment in the transition countries of Georgia and Russia.

Readings/Bibliography

My power presentations and all readings can be downloaded from the website www2.dse.unibo.it/lehmann (protected with username and password). The username and password will be revealed to students on the first day of lecture.

Teaching methods

Conventional lectures and students' presentations of selected papers.

Assessment methods

An in-class exam will count for 70% and student presentations for 30% of final grade.

Teaching tools

White board and projector.

Office hours

See the website of Hartmut Lehmann