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Carolyn Ann Kadas

Professoressa a contratto

Dipartimento di Scienze Politiche e Sociali

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Economics of Transition in Central Europe and South East Europe - Syllabus

Economics of Transition in Central Europe and South East Europe
Prof.: Carolyn Kadas, M.A.
MIREES, Fall, 2014

Overview
This is a comparative study of the Central and South East European countries’ economic transition since 1989, taught in two parts, the first focusing on the central European countries (the new EU member states or NMS) and the second part focusing on the south east European countries. The course also touches upon the experience of economic transition in Russia and the former Soviet republics for comparative purposes. The course begins by examining the basic features of the pre-1989 Soviet-type command economies, focusing on the origins of economic decline in the 1980s. We then look at individual countries’ economic strategies and policy choices in introducing market reforms in terms of macroeconomic stabilization, microeconomic adjustment, privatization, and price, trade and financial liberalization. We will examine the development of labour markets, unemployment, social costs and benefits of transition, as well as the transformation of social welfare systems, demographic trends, healthcare and pension reform. We will look specifically at local firms and how factors from the past and new foreign investment have impacted enterprise development and the structure of the economies. The process of EU accession and its effects on economic growth, as well as issues involved in entering the Euro zone will be studied. We examine infrastructure development, energy policies and tax policies. We will look at the impact of the global financial crisis on these regions, and the emergence of varieties of capitalism.
Pre-requisites A basic understanding of economics is desirable but not necessary
Teaching method
Lectures outlined in Power point presentations with abundant class participation
Mid-term test, short research paper and presentation
1. Mid-term essay test (2-hours, 3 essays chosen from a total of 5 questions)
2. Research paper of 3000 words and 10 minute oral presentation (with Power Point) on a topic chosen from the themes we will be covering in class
3. Final oral exam on all material covered in class.
 
Grading system
Mid-term test: 25%
Research paper and presentation: 25%
Final Exam: 50%
Core Textbooks:
• Myant, Martin and Jan Drahokoupil, Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia,(2010) Wiley-Blackwell
• Aslund, Anders, How Capitalism was Built: The Transformation of Central and Eastern Europe, Russia, and Central Asia (2007) Cambridge University Press
• Kornai, Janos, The Socialist System: The Political Economy of Communism. Princeton: Princeton University Press, 1992
• R.J. Crampton. The Balkans Since the Second World War (Pearson, 2002)
• Will Bartlett. Europe's Troubled Region: Economic Development, Institutional Reform and Social Welfare in the Western Balkans (Routledge, 2008).
• Milica Uvalic. Serbia’s Transition: Towards a Better Future (Palgrave, 2010)
Syllabus

Part I : Economics of Transition in Central Europe
Lecture 1: Introduction
• Defining macro-economic terms
Required reading:
• Pacek, Nenad and Daniel Thorniley, Emerging Markets. 2007. Ch. 6 Interpreting economic indicators, pp.51-61
• Kornai, Janos, What the Change of System from Socialism to Capitalism Does and Does Not Mean. Journal of Economic Perspectives. Winter 2000, 14:1, pp. 27-42. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.14.1.27
Lecture 2: Origins of economic decline in Eastern Europe
• Features of Stalinist systems, 1950s
• Soft budget constraint
• Shortage economy
Required reading:
• Kornai, Janos The Socialist System: the Political Economy of Communism. Ch. 3 (Power), Ch. 4 (Ideology), Ch. 5 (Property)
• Kornai, Janos, “The Soft Budget Constraint” http://faculty.vassar.edu/kennett/Kornai.htm

Supplementary Reading:

• Roland, Gérard, Transition and Economics: Politics, Markets and Firms. (2000) Ch. 1 “Understanding Transition” pp. 1-22
• Lavigne, Marie, The Economics of Transition: From Socialist Economy to Market Economy (1999) pp. 3-112
Lecture 3: Pre-1990 attempts at economic reform and economic collapse.
• Pre-1989 economic reforms
• Import-led growth
• Foreign indebtedness
• Socialist market economy
• Collapse of Soviet-type systems
Required reading:
• Myant, Chapters 1, 2 and 3
• Aslund, Chapter 1
Lecture 4: Beginning of transition from command to market economy
• Strategies and priorities of economic transformation – the Washington consensus
• Macroeconomic stabilization and economic liberalization
• Shock-therapy vs. gradualism
• Economic recession, output fall
Required reading:
• Myant, Introduction, Chapters 4 and 5

Supplementary Reading:
• Aslund, Chapters 2, 3, 4, 5
• Gros & Steinherr, pp. 60-75
• Lavigne, Marie, The Economics of Transition: From Socialist Economy to Market Economy (1999) pp. 113-161
Lecture 5: Privatization
• Political constraints on privatization
• Centralized and decentralized privatization
• Modes of privatization - Voucher privatization, management and employee buy-outs, direct sales.
• Share of private sector in economies
Required reading:
• Myant, Chapter 13
• Aslund, Chapter 6

Supplementary reading:
• Lavigne, Marie, The Economics of Transition: From Socialist Economy to Market Economy (1999) pp. 162-202
• Boycko, Maxim et. al. Privatizing Russia. Ch. 1 and Ch. 2 Political Control of Economic Activity
Lecture 6: Social costs and benefits of transition.
• Healthcare and pension reform
• Unemployment
• Corruption, the rule of law
Required reading:
• Myant, Chapters 7, 10
• Aslund, Chapter 7
• Healthcare in central and eastern Europe, Economies in Transition, EIU, March, 2008*
Lecture 7: Infrastructure development, energy policy, taxation
• Industrial development policy
• Energy policy
• Infrastructure – role of EU funding
• Taxation, public spending
Required reading:
• Myant, Chapters 9
• Buchan, David. Eastern Europe’s energy challenge: meeting its EU climate commitments. Oxford Institute for Energy Studies, 2010
Supplementary reading:
• Evaluating the environment for public private partnerships in Eastern Europe and
the Commonwealth of Independent States. The 2012 EECIS Infrascope http://www.ebrd.com/downloads/news/eecis.pdf
Lecture 8: Enterprise Development and Foreign Direct Investment
• Shock and recovery
• Growth of new firms
• Different business environments: Russia vs. Central Europe
• Foreign direct investment
Required reading:
• Myant, Chapters 11, 12, 15
Lecture 9: EU accession and Euro zone entry
• Accession effects on economic growth, FDI
• Maastricht criteria and new member states
• Balassa-Samuelson effect
Required reading:
• Rosa Balfour and Corina Stratulat (2012), “The enlargement of the European Union” http://www.epc.eu/documents/uploads/pub_3176_enlargement_of_the_eu.pdf
• Jacek Wieclawski, “The Eastern Enlargement of the European Union: Fears, Challenges, and Reality” http://globality.cc.stonybrook.edu/?p=118
• Leon Podkaminer (2013), “Development Patterns of Central and East European Countries in the Course of Transition and Following EU Accession, http://wiiw.ac.at/development-patterns-of-central-and-east-european-countries-in-the-course-of-transition-and-following-eu-accession--p-2985.html
Lecture 10: Impact of global economic crisis on CEE
• Varieties of capitalism
• Economic conditions prior to the “crash”
• Role of international financial institutions
• Lessons learned
Required Reading:
• Myant, Chapters 16, 17
• Aslund, The Last Shall Be the First, Chapters 1, 2, 7, 8, 9
Mid-term test on Part I (Nov. 7, 2014)

Part II: Economics of Transition in Southeast Europe
Lecture 12: Basic features of Yugoslav economy
• Basic features of Yugoslav economy prior to 1990s
Required reading:
- Milica Uvalic. Serbia’s Transition: Towards a Better Future (2010) pp. 14-44
- Will Bartlett. Europe’s Troubled Region. (2008) pp.8-18.
- Ljubomir Madzar. The Economy of Yugoslavia: Structure, Growth Record and Institutional Framework. In Yugoslavia in Transition. (Berg, 1992) pp. 31-62*
Additional reading:
R.J. Crampton, The Balkans Since the Second World War (Pearson 2002) pp. 113-155
Lecture 13: Economic systems of Romania, Bulgaria and Albania prior to the transition

Required reading:
- R.J. Crampton (2002) pp. 156-204
- Bartlett (2008), pp. 18-20
Additional reading:
- Marvin Jackson. The Rise and Decay of the Socialist Economy in Bulgaria. Journal of Economic Perspectives, Vol. 5, no. 4, Fall 1991, pp. 203–209. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.5.4.203
- David Turnock. Aspects of Independent Romania’s Economic History with Particular Reference to Transition for EU Accession (2007), pp. 31-62 (chapter 3)

Lecture 14: The 1990s in ex-Yugoslavia, Romania, Bulgaria and Albania
Reading:
- Bartlett (2008) pp. 21-59
- Uvalic (2010) pp.45-106 (chapters 3-4; The early 1990s and Post Dayton)

Additional reading:
- Uvalic, Transition in Southeast Europe. Understanding Economic Development
- and Institutional Change (2010) http://www.wider.unu.edu/publications/working-papers/2010/en_GB/wp2010-41/_files/83469556754284600/default/2010-41.pdf
- Nikolov Boyko et al. Understanding Reform: A Country Study for Bulgaria. The wiiw Balkan Observatory Working Papers|056| October 2004 http://balkan-observatory.net/wp/2004%2010%20wiiw%20bo%20wp%20056.pdf
- David Turnock. Aspects of Independent Romania’s Economic History with Particular Reference to Transition for EU Accession (2007), pp. 63-126 (chapters 4-5)
Lecture 15: Privatization and FDI in the Balkans
Reading:
- Bayliss, Kate, Post-conflict Privatisation: A Review of Developments in Serbia and Bosnia Herzegovina http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/2519.pdf
- Bartlett (2008) pp. 60-112
- Serbia: Uvalic (2010) pp. 107-215
- Eleonora Cutrini, Francesca Spigarelli. “Italian FDI integration with Southeast Europe: country and ?rm-level evidence” http://ideas.repec.org/p/mcr/wpaper/wpaper00033.html
Lecture 16: Social effects of transition – migration, remittances, unemployment, labor market dynamics, healthcare, education.
Reading:
- Bartlett (2008) pp. 141-168 (chapter 8, Social policies and welfare reforms)
- World Health Organization (2006) Health and Economic Development in South-eastern Europe.
- Sonja Avlijas, Milica Uvalic: Political economy of local level public sector employment: a case study of Serbia. Journal of Southeast Europe, Volume 35, Issue 2, 2011*
Lecture 17: EU integration and regional economic integration – Romania and Bulgaria, Western Balkans
- Trade integration
- Conditionality, institutional reform
Reading:
- Uvalic (2010), pp. 216-248
- Bartlett (2008) pp. 169-213 (role of foreign aid and EU integration)
Additional reading:
- Bartlett, Malekovic´ and Monastiriotis (eds.) (2013) Decentralization and Local Development in South East Europe
Lecture 18: Impact of global economic crisis on SEE
- Fiscal and monetary policy measures
- Euroization – causes and effects
- Poverty levels
Reading:
- Bartlett, Will and Vassilis Monastiriotis, eds.(2010), South Eastern Europe after the
crisis: a new dawn or back to business as usual? London School of Economics
http://www2.lse.ac.uk/europeanInstitute/research/LSEE/PDF%20Files/Publications/SEE%20Crisis%20Book.pdf
- Dimitar Bechev (2012) “The periphery of the periphery: the Western Balkans and the euro crisis” http://ecfr.eu/page/-/ECFR60_WESTERN_BALKANS_BRIEF_AW.pdf
Additional reading:
- Peter Sanfey and Simone Zeh, (2012) Making Sense of Competitiveness Indicators in South East Europe, St Antony’s College, University of Oxford http://www.sant.ox.ac.uk/seesox/occasionalpapers/MakingsenseofcompetitivenessindicatorsinSEE.pdf
Lecture 19: Student presentations
Lecture 20: Student presentations, review
Selected reading

• Myant, Martin and Jan Drahokoupil, Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia. Blackwell-Wiley, 2010
• Aslund, Anders, How Capitalism Was Built: The Transformation of Central and Eastern Europe, Russia and Central Asia. Cambridge University Press, 2007
• Aslund, Anders, The Last Shall be the First: The East European Financial Crisis. Peterson Institute for International Economics, 2010
• Gros, Daniel & Alfred Steinherr, Economic Transition in Central and Eastern Europe: Planting the Seeds. Cambridge University Press, 2004
• Aslund, Anders, Building Capitalism: The Transformation of the former Soviet Bloc. Cambridge University Press, 2002
• Bartlett, William, Europe’s Troubled Region. Economic development, institutional reform and social welfare in the Western Balkans, Routledge, 2008
• Kornai, Janos, The Socialist System: The Political Economy of Communism. Princeton: Princeton University Press, 1992
• Buchan, David. Eastern Europe’s energy challenge: meeting its EU climate commitments.Oxford Institute for Energy Studies, 2010
• John Lampe, Balkans into Southeast Europe (Palgrave 2006)
• R.J. Crampton, The Balkans Since the Second World War (Pearson 2002)
• Harold Lydall, Yugoslavia in Crisis (Clarendon Press 1989)
• Susan Woodward, Balkan Tragedy: chaos and dissolution after the Cold War (Brookings Institution, 1995)
• David Turnock, Aspects of Independent Romania’s Economic History with Particular Reference to Transition for EU Accession (2007)
• Štiblar, F. The Impact of the Global Crisis on Montenegro and the Western Balkans, CBM, Podgorica, 2009
• EBRD (European Bank for Reconstruction and Development) Transition Report, 1996-2009
• EBRD Working papers. http://www.ebrd.com/pubs/econo/series/wp.htm
• Roland, Gerard. Transition and Economics. MIT Press, 2000
• Lavigne, Marie. The Economics of Transition: From Socialist Economy to Market Economy. St. Martin’s Press, 1999
• Economist Intelligence Unit (EIU) Business Eastern Europe (weekly newsletter)
• EIU, Economies in transition: Eastern Europe and the former Soviet Union, Regional overview (quarterly report)
• Pacek, Nenad and Daniel Thorniley, Emerging Markets, lessons for business success and the outlook for different markets, The Economist, 2004 and 2007 editions
• Wiener Institut fuer Internazionale Wirtschaft (Vienna Institute for International Economics - WIIW), http://www.wiiw.ac.at
• William Davidson Institute, University of Michigan. Working Papers http://ideas.repec.org/s/wdi/papers.html
• World Bank newsletter Beyond Transition, http://newsletters.worldbank.org
• Many of the recent articles on transition economies are published in the following journals: Journal of Comparative Economic, Comparative Economic Studies, Economics of Transition
(*Readings will be provided by professor either electronically or photocopied)


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