WHEN T H E BROOKINGS Panel on Economic Activity began in 1970, the world economy roughly accorded with the idea of three distinct economic systems: a capitalist first world, a socialist second world, and a developing third world which aimed for a middle way between the first two. The third world was characterized not only by its low levels of per capita GDP, but also by a distinctive economic system that assigned the state sector the predominant role in industrialization, although not the monopoly on industrial ownership as in the socialist economies. The years between 1970 and 1995, and especially the last decade, have witnessed the most remarkable institutional harmonization and economic integration among nations in world history. While economic integration was increasing throughout the 1970s and 1980s, the extent of integration has come sharply into focus only since the collapse of communism in 1989. In 1995 one dominant global economic system is emerging. The common set of institutions is exemplified by the new World Trade Organization (WTO), which was established by agreement of more than 120 economies, with almost all the rest eager to join as rapidly as possible. Part of the new trade agreement involves a codification of basic principles governing trade in goods and services. Similarly, the International Monetary Fund (IMF) now boasts nearly universal membership, with member countries pledged to basic principles of currency convertibility. Most programs of economic reform now underway in the developing world and in the post-communist world have as their strategic aim the

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Economic Reform and the Process of Global Integration

China is an important counterexample to the findings in the law, institutions, finance, and growth literature: neither its legal nor financial system is well developed by existing standards, yet it has one of the fastest growing economies. We examine 3 sectors of the economy: the State Sector (state-owned firms), the Listed Sector (publicly listed firms), and the Private Sector (all other firms with various types of private and local government ownership). The law-finance-growth nexus established by existing literature applies to the State and Listed Sectors: with poor legal protections of minority and outside investors, external markets are weak, and the growth of these firms is slow or negative. However, with arguably poorer applicable legal and financial mechanisms, the Private Sector grows much faster than the State and Listed Sectors, and provides most of the economy's growth. This suggests that there exist effective alternative financing channels and governance mechanisms, such as those based on reputation and relationships, to support this growth.

Law, Finance, and Economic Growth in China

https://finance.wharton.upenn.edu/~allenf/download/Vita/finlaw-china-122402.pdf

Law, finance, and economic growth in China

It comes as something ofa surprise to reflect that the New York Review ofBooks is now over twenty years old. Even people of my generation (that is, old enough to remember the revolutionary 196os but not young enough to have taken a very exciting part in them) think of the paper as eternally youthful. In fact, it has gone through years of relatively quiet life, yet, as always in a competitive journalistic market, it is the controversies that attract the interest of the reader and to which the history (especially an admittedly impressionistic survey that tries to include something of the intellectual context in which a journal has operated) must give some attention. Not all the attacks which the New York Review has attracted, both early in its career and more recently, are worth more than a brief summary. What do we now make, for example, of Richard Kostelanetz's forthright accusation that 'The New York Review was from its origins destined to publicize Random House's (and especially [Jason] Epstein's) books and writers'?1 Well, simply that, even if the statistics bear out the charge (and Kostelanetz provides some suggestive evidence to support it, at least with respect to some early issues), there is nothing surprising in a market economy about a publisher trying to push his books through the pages of a journal edited by his friends. True, the New York Review has not had room to review more than around fifteen books in each issue and there could be a bias in the selection of

http://www.jstor.org/stable/pdfplus/3507774.pdf

The New York Review of Books

During recent years social scientists have come to reaffirm that understanding almost any facet of social life requires a simultaneous understanding of how economic institutions work and how they are influenced by values and norms. Sociology, and especially economic sociology, is well equipped to be of assistance in this endeavor. Neil Smelser and Richard Swedberg bring together leading sociologists, economists, and political scientists in The Handbook of Economic Sociology, the first comprehensive view of this vital and growing field. "This excellent volume is a compilation of some of the best writing in this field over the past decade, including basic works like Oliver Williamson's transaction cost theory of the firm, and [is] a helpful comparison of economic sociology to mainstream economics." —Francis Fukuyama, Foreign Affairs "This is the first comprehensive theoretical and empirical account of the burgeoning field of economic sociology. The scholarship is consistently strong. . .. The book will be greeted warmly and read by serious scholars throughout the social sciences." —Robert K. Merton "This is a bold, ambitious, almost daunting project. ... It will surely become the standard reference book for the field—the sort of text every scholar will have to know-, consult, and cite." —Viviana Zelizer

Handbook of Economic Sociology

Reform in China and Russia

Jeffrey Sachs and Wing Thye Woo

China's experience does not show that gradual reform is superior to the shock therapy undertaken in Eastern Europe and the Former Soviet Union (EEFSU). Differing performance primarily reflects different economic structures prior to reform: China was a peasant agricultural society, EEFSU was urban and overindustrialized. In both, jobs in state enterprises were so heavily subsidized that workers refused to move to new industries elsewhere, even when productivity in the latter was much higher. In EEFSU the large state sector impeded structural adjustment. Curtailing subsidies would have produced many losers who used their power to resist this outcome; failure to curtail subsidies then cut off the potential supply of labour and other factors to new emerging firms. China's state enterprises have not performed as well as the rest of the Chinese economy and do not explain its success; rapid growth was possible because the large agricultural sector contained vast surplus labour, and did not enjoy subsidies and soft budget constraints. Once constraints on migration across regions and jobs were removed, this labour was available to fuel expansion in new industries. Unlike the distributional conflict in EEFSU, in China reallocation of labour allowed all groups to gain.

In both, partial liberalization also unleashed macroeconomic pressures, manageable in China because of rapid growth and adequate monetary policy, but explosive in much of EEFSU because of deeper structural problems and gross monetary mismanagement.

https://www.jstor.org/stable/pdfplus/1344459.pdf

Structural factors in the economic reforms of China, Eastern Europe, and the Former Soviet Union

Many studies of regional disparity in China have focused on the preferential policies received by the coastal provinces. We decomposed the location dummies in provincial growth regressions to obtain estimates of the effects of geography and policy on provincial growth rates in 1996â€“99. Their respective contributions in percentage points were 2. 5 and 3. 5 for the province-level metropolises, 0. 6 and 2. 3 for the northeastern provinces, 2. 8 and 2. 8 for the coastal provinces, 2. 0 and 1. 6 for the central provinces, 0 and 1. 6 for the northwestern provinces, and 0. 1 and 1. 8 for the southwestern provinces. Because the so-called preferential policies are largely deregulation policies that have allowed coastal Chinese provinces to integrate into the international economy, it is far superior to reduce regional disparity by extending these deregulation policies to the interior provinces than by re-regulating the coastal provinces. Two additional inhibitions to income convergence are the household registration system, which makes the movement of the rural poor to prosperous areas illegal, and the monopoly state bank system that, because of its bureaucratic nature, disburses most of its funds to its large traditional customers, few of whom are located in the western provinces. Improving infrastructure to overcome geographic barriers is fundamental to increasing western growth, but increasing human capital formation (education and medical care) is also crucial because only it can come up with new better ideas to solve centuries-old problems like unbalanced growth.

Geography, Economic Policy and Regional Development in China

We would like to thank Peter Hooper of the Board of Governors of the Federal Reserve System, Stephen Marris and John Williamson of the Institute for International Economics, and members of the Brookings Panel for helpful discussions. Data Resources, Inc., generously made available computer facilities for this study. The paper was written while Gilles Oudiz was a visiting scholar at the Massachusetts Institute of Technology, and he gratefully acknowledges the financial support of the North Atlantic Treaty Organization and the Fulbright fellowship program during this visit. 1. For useful discussions of the policy coordination debate in the context of the economic summit meetings, see George de Menil and Anthony M. Solomon, Economic Summitry (New York: Council on Foreign Relations, 1983), and Robert D. Putnam and Nicholas Bayne, Hanging Together: The Seven-Power Summits (Harvard University Press, 1984). Michael Stewart, in The Age of Interdependence: Economic Policy in a Shrinking World (MIT Press, 1984), offers an interesting brief for greater policy coordination and discusses the historical experience in several chapters. For a view of the debate over policy coordination in 1983, see Sylvia Ostry, "The World Economy in 1983: Marking Time," America and the World 1983, special issue, Foreign Affairs, vol. 62, no. 3 (1984), pp. 533-60.

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Macroeconomic Policy Coordination among the Industrial Economies

http://homepage.ntu.edu.tw/~kslin/macro2009/Sheffrin%20and%20Woo%201990.pdf

Present value tests of an intertemporal model of the current account

Broadly speaking, two schools of thought have emerged to interpret China's rapid growth since 1978:the experimentalist school and the convergence school The experimentalist school attributes China's successes to the evolutionary, experimental, and incremental nature of China's reforms Specifically, the resulting non-capitalist institutions are said to be successful in (a) agri- culture where land is not owned by the farmers; (b) township and village en- terprises (TVEs) which are owned collectively by rural communities; and (c) state owned enterprises (SOEs) where increased competition and increased wage incentive, not privatization, have been emphasized The convergence school holds that China's successes are the result of its institutions being allowed to converge with those of non-socialist market economies, and that China's economic structure at the start of reforms is a major reason for the fast growth China had a high population density heavily concentrated in low-wage agriculture which was favorable for labor-intensive export-led growth in other parts of East Asia The convergence school also holds that China's gradualism results mainly from a lack of consensus over the proper course, with power divided between market reformers and old-style socialists; and that the 'inno- ative economic circumstances Perhaps the best test of the two approaches is whether China's policy choices are in fact leading to institutions harmonized with normal market economies or to more distinctive innovations The recent policy trend has been towards institutional harmonization rather than institutional innovation, suggesting that the government accepts that the ingredients for a dynamic market economy are already well-known

Wing Thye Woo

Papers

Structural factors in the economic reforms of China, Eastern Europe, and the Former Soviet Union

Geography, Economic Policy and Regional Development in China

Macroeconomic Policy Coordination among the Industrial Economies

Present value tests of an intertemporal model of the current account

Understanding China's Economic Performance