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Volume 16, Number 1, Winter 2002
Articles
Transition Economies: Performance and Challenges by Jan Svejnar
I present data and assess the first twelve years of the transition from plan to market. Transformations have taken place, but the income gap between the transition and advanced economies has widened. Transition countries further east have performed worse than those further west, but policies matter. All countries carried out quickly Type I reforms, such as macroeconomic stabilization, price liberalization, small-scale privatization, and breakup of state-owned enterprises. They differed in Type II reforms, such as large-scale privatization and development of banking and legal systems. Countries that developed a functioning legal framework and corporate governance have performed better than others.
The Political Economy of Transition by Gérard Roland
Institutional Determinants of Labor Reallocation in Transition by Tito Boeri and Katherine Terrell
The transition process differed in the countries of the Former Soviet Union (FSU) and those of Central and Eastern Europe (CEE) in terms of reallocation of labor real wage, employment and output adjustment. We sift through the theoretical and empirical literature to find an explanation for these diverging adjustment trajectories and conclude that they can be explained by the fact that the CEE countries adopted social policies that upheld wages at the bottom of the distribution forcing the old sector to restructure or collapse while the FSU countries allowed wages to free-fall not forcing the hand of the old sector.
The Great Divide and Beyond: Financial Architecture in Transition by Erik Berglof and Patrick Bolton
Competition and Corporate Governance in Transition by Saul Estrin
This paper examines the elements of institutional development critical to the enhancement of company performance in transition economies. This includes initial conditions, forms of privatization, institutional frameworks and the competitiveness of markets. Comparing empirical evidence, the paper concludes that there is a clear distinction in effectiveness of policies followed and their impact between Central Europe and CIS countries. This divergence is attributed to fundamentally different political attitudes toward reform, the need of CIS governments to gain political support for reform and as a consequence of the desire of Central European countries to join European Union.
Environmental Policy Since Earth Day I: What Have We Gained? by A. Myrick Freeman III
I review the data on costs and benefits of the major environmental laws passed during the 1970s. The winners in terms of benefit-cost analysis include: getting lead out of gasoline; controlling particulate air pollution; reducing the concentration of lead in drinking water; and the cleanup of hazardous waste sites with the lowest cost per cancer case avoided under Superfund The losers include: mobile source air pollution control; water pollution control; and many of the regulations and cleanup decisions taken under the Federal Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and Superfund.
Confronting the Environmental Kuznets Curve by Susmita Dasgupta, Benoit Laplante, Hua Wang and David Wheeler
The environmental Kuznets curve posits an inverted-U relationship between pollution and economic development. Pessimistic critics of empirically estimated curves have argued that their declining portions are illusory, either because they are cross-sectional snapshots that mask a long-run "race to the bottom" in environmental standards, or because industrial societies will continually produce new pollutants as the old ones are controlled. However, recent evidence has fostered an optimistic view by suggesting that the curve is actually flattening and shifting to the left. The driving forces appear to be economic liberalization, clean technology diffusion, and new approaches to pollution regulation in developing countries.
What Really Matters in Auction Design by Paul Klemperer
The most important issues in auction design are the traditional concerns of competition policy-preventing collusive, predatory, and entry-deterring behavior. Ascending and uniform-price auctions are particularly vulnerable to these problems. The Anglo-Dutch auction-a hybrid of the sealed-bid and ascending auctions-may perform better. Effective antitrust is also critical. Notable fiascoes in auctioning mobile-phone licenses, television franchises, companies, eletricty, etc., and especially the European "third-generation" (UMTS) spectrum auctions, show that everything depends on the details of the context. Auction design is not "one size fits all."
The Trouble With Electricity Markets: Understanding California's Restructuring Disaster by Severin Borenstein
In June 2000, after two years of fairly smooth operation, California's deregulated wholesale electricity market began producing extremely high prices and threats of supply shortages. The upheaval demonstrated dramatically why most current electricity markets are extremely volatile: demand is difficult to forecast and exhibits virtually no price responsiveness, while supply faces strict production constraints and prohibitive storage costs. This structure leads to periods of surplus and of shortage, the latter exacerbated by sellers' ability to exercise market power. Electricity markets can function much more smoothly, however, if they are designed to support price-responsive demand and long-term wholesale contracts for electricity.
Policy Watch: U.S. Disability Policy in a Changing Environment by Richard V. Burkhauser and Mary C. Daly
In this paper we provide a context for evaluating the goals and effectiveness of current disability policy. We review the Social Security Disability Insurance and Supplemental Security Income programs and examine trends in disability benefit receipt and employment among working-age people with disabilities. We discuss the difficulties in crafting efficient and equitable programs for this difficult to target, heterogeneous population. We conclude that changes in policy rather than in underlying health are most likely behind the increases in disability benefit receipt and the declines in employment of working-age people with disabilities over the 1990s business cycle.
Data Watch: Research Data from Transition Economics by Randall K. Filer and Jan Hanousek
Features
Recommendations for Further Reading
Notes