The Palgrave Handbook of Comparative Economics

"A book full of insights on economic systems and how to transit from one to another. A good Reference Manual for academics and policy-oriented researchers, with many useful tools to understand our changing world." Claudia Senik, Full Professor at Sorbonne University and Paris School of Economics. "An invaluable guide to the post-communist economic transition and to the research it inspired, by a range of the leading experts from academia and policy circles." Daniel Treisman, Professor of Political Science, University of California, Los Angeles. "This volume is another proof, if you needed one, that the comparative perspective enormously enriches the social sciences. The volume thankfully brings together scholars with very different approaches allowing the reader to make up his or her own mind about their usefulness in explaining observations and helping us improve the world." Professor Erik Berglof, Director, Institute of Global Affairs, LSE School of Public Policy. This book aims to define comparative economics and to illustrate the breadth and depth of its contribution. It starts with an historiography of the field, arguing for a continued legacy of comparative economic systems, which compared socialism and capitalism, a field which some argued should have been replaced by institutional economics after the fall of the Berlin Wall. The process of transition to market capitalism is reviewed, and itself exemplifies a new combination of comparative analysis with a focus on institutional development. Going beyond, chapters broadening the application of comparative analysis and applying it to new issues and approaches, including the role and definition of institutions, subjective wellbeing, inequality, populism, demography, and novel methodologies. Overall, comparative economics has evolved in the past 30 years, and remains a powerful approach for analyzing important issues The Palgrave Handbook of Comparative Economics Foreword References Acknowledgements Contents List of Figures List of Charts List of Tables Notes on Contributors 1: Introduction to the Palgrave Handbook of Comparative Economics 1 What’s in a Term? 2 The “Old” Comparative Economics: The Origin of the Field 3 From “Old” to “New” Comparative Economics 4 Further Evolutions: More Institutions, More Outcomes 5 Structure of the Book 6 Some More Guidance on How to Read This Handbook References Part I: Evolution of the Field of Comparative Economics Systems 2: A Historiography of Comparative Economics 1 Introduction 2 Early Economic Comparisons 3 Economic Systems Based on Religion and Utopias 4 Toward Systems Based on Self-Interest 5 General Equilibrium Theory and the Pareto Principle 6 Sovietology as Comparative Economics 7 The Economic System 8 The Economics of Transition 9 The New Comparative Economics 10 Institutions 11 Conclusion References 3: The Soviet Economic System: An Archival Re-evaluation 1 Western Historiography of the Soviet Economy 2 The Archival Revolution 3 Planners’ Preference of the Dictator 4 The Stalin Dictatorship 5 The Planned Economy: Gosplan 6 Resource Managers Versus Planners 7 Money and Prices 8 Freezing the Economy at the Achieved Level 9 Conclusions References 4: Institutions, Institutional Systems and Their Dynamics 1 Introduction 2 Institutions and Institutional Systems 3 Different Institutional Systems Have Different Dynamics 4 The Typology of Institutional Systems and of the Major Transitions 5 Transition Toward Socialism and Away from It 6 Economic Transitions Under Democracy 7 Authoritarian Transitions After Free Elections 8 Concluding Comments References 5: The “New Comparative Economics”: A Critical Review 1 Introduction 2 Comparative Economic Systems and Comparative Economics 3 The New Comparative Economics 4 A Reasoned Critique of NCE 5 The Uneasy Coexistence of Complexity and Simplification 6 The State of the Profession and Scientific Publications 7 To Conclude: Is Coexistence and Cooperation Possible? Appendix References Part II: Comparative Economic Systems in Economic History 6: Comparative Economic History 1 Introduction 2 Comparative Archeology 3 Comparative Culture 4 Comparative Institutions 5 A Comprehensive Database on Historical Institutions 5.1 Are There Institutional Clusters? 5.2 Links Between Institutions and Markets 5.3 What Explains the Differences in Systems? 5.4 Comparative Economic History and Its Relevance for the Modern World 6 Conclusion Appendix: Scoring Rules for Our Institutional Variables Legal Institutions Land Ownership Private Slavery Composite Law Index Political Institutions Government Centralization Importance of Cities Sociological Institutions Importance of Clan Social Stratification Ethnic Diversity References 7: The World’s First Meritocracy Through the Lens of Institutions and Cultural Persistence 1 Introduction 2 Keju the Institution 2.1 Origins and Evolution 2.2 Key Features and Characteristics 3 Keju and Social Mobility 4 Keju as Culture 4.1 Returns to the Civil Exam 4.2 Cultural Transmission 4.3 Other Possible Channels of Transmission 5 Beyond Human Capital Outcomes 6 Conclusions Appendix References 8: Institutions Matter: But So Does History—A Comparison of Mediaeval Dubrovnik with Other Dalmatian Cities 1 Introduction 2 Ragusan Polity and Economy 2.1 How Did the Rulers Rule the Ruled? 2.2 Growth of the Ragusan Economy 3 Good Institutions: Good Economic Performance 3.1 Fiscal Prudence 3.2 Market-Friendly Policies and Institutions 3.3 The Quality of Judicial Procedures 3.3.1 Formal Laws 3.4 Efficiency of Court Procedures 4 Social Equity: Sufficiently Fair? 4.1 Wealth and Poverty 4.2 Fair Rule-of-Law and Access to Legal System 4.3 Sanitation and Health Care Measures 4.4 Good Institutions: Necessary but Not Always Sufficient? 5 Conclusions References 9: Long-Run Inequality in Communist Countries: Before, During and After 1 Introduction 2 Secular Trends 3 Decline in Capital Income Concentration 3.1 Wealth Inequality Before Communism 4 Long-Term Labour Income Inequality 4.1 Wage Distribution by Percentile Ranks 4.1.1 Soviet Union/Russia 4.1.2 Poland 4.1.3 Gender Inequality 4.2 Occupational Earnings Gaps 5 Understanding the Post-Communist Inequality Patterns 6 Conclusion References 10: Effect of Historical Forces on Liberalization and Democratization in Transition 1 Introduction 1.1 Economic and Political Science Theories 1.2 Data-Based Hypotheses 2 The Post-Communist Transformation in Figures 2.1 Income 2.2 Living Standards and Life Expectancy 2.3 Economic Reform 2.4 Political Rights and Democracy 2.5 Divergence in the Transition 3 Divergence: Effects of History 3.1 The Fifth-Century Religious Divide 3.2 The Nineteenth-Century Empires 3.3 Main Conclusion on Historical Influences 3.4 Related Regression Analysis from Earlier Studies 3.5 Georgia: The Puzzle in Transition 4 Conclusions References Part III: Post-Communist Transition 11: Thirty Years of Transition: Eleven Stylised Facts 1 Introduction 2 Outcomes for Economic and Social Well-Being 2.1 Income Per Capita: How Much Catching Up? 2.2 Income Distribution: First Worsens, then Gets Better but with Great Diversity 2.3 Social Well-Being: A Comprehensive Measure 3 Progress Towards a Market System 3.1 Overall Achievements in Systemic Transformation 3.2 Sequencing of Liberalisation and Institutional Development 4 Trends in Democratisation 5 Summary. Eleven Stylised Facts of Transition References 12: The Importance of Domestic Commitment 1 Introduction 2 Degree of National Cohesion 3 Strength of Civil Society and Intelligentsia 4 Democratic Breakthrough or Regime Change 5 Why Speed Was So Important 6 Political Leadership 7 Reform Team 8 Reform Program 9 International Support 10 Founding Elections 11 Political Skills 12 Conclusions: Domestic Commitment for Economic Reform Is Vital for Success References 13: Political Economy of Transition Reforms 1 Why Political Economy 2 Political Economy Before Transition 3 Political Economy After the First Round of Reforms 4 The Anti-reform Backlash: Inequality and Unfairness 5 Political Economy of Oligarchic Capture 6 Political Economy Today 7 Implications References 14: The EU Anchor Thesis: Transition from Socialism, Institutional Vacuum and Membership in the European Union 1 Introduction 2 An Enlargement Like No Other 3 The Institutional Channel 4 Effects of EU Membership 5 Conclusions References 15: Some Reflections on Transition: Its Roots, Complexity of the Process, and Role of the IMF and Other Organizations 1 Historical Background on Central Planning 2 From the 1940s to the 1980s 3 The Start of the Transition 4 Concluding Comments References 16: Are the Transition Economies Still in Transition? 1 Was Transition Special? 2 Are Transition Countries Still Different? 3 The Anomaly of the Financial Sector 4 Normalcy and Convergence 5 Conclusion Appendix References 17: Institutional Change in Transition: An Evolving Research Agenda 1 Growth and Reforms: From Natural Experiment to Institutional Analysis 2 Transition as Institutional Change: Key Stylised Facts About Economic and Political Institutions in the Region 3 Going Deeper Into the Causes of Institutional Change: Understanding Support for Reforms 4 Institutional Change as Stepping Back in Time—Values and Beliefs and the Persistence of Political Institutions—Or Zooming in on the Mechanisms of Change 4.1 Stepping Back in Time 4.2 Institutional Change as Zooming In 5 Conclusions Appendix References Part IV: New Comparative Economics: Growth and Formal Institutions in a Globalised World 18: Institutions, Human Capital and Economic Growth 1 Introduction 2 Institutions and Human Capital: A Review of the Literature 2.1 Property Rights and Growth: Theory 2.2 Property Rights and Growth: The Evidence 2.3 Human Capital, Institutions and Growth: Theory and Evidence 3 Empirical Analysis 3.1 Data 3.2 Model Specification and Estimation Issues 3.3 Empirical Results 4 Conclusion References 19: Reform Design Matters: The Role of Structural Policy Complementarities 1 Introduction 2 Theoretical Elements 3 Results on Reform Complementarities 3.1 The Post-Communist Transition 3.1.1 A Broader View: Peering Beyond Pair-Wise Interactions 3.2 Beyond Transition: Reform Complementarities in Opening the Economy 3.2.1 Structural reforms as a system? 3.3 Reform Complementarities Within Specific Policy Areas 4 Identifying Policy Complementarities: A Way Forward 4.1 Policy complementarities as central in economic development processes 4.2 Growth channels and causality Links: tentative elements for a research agenda 5 Concluding Remarks References 20: Democracy as a Driver of Post-Communist Economic Development 1 Introduction 2 Data and Methodology 3 Democracy and Growth 4 Democracy and Investment 5 Conclusions References 21: Economic Development, Transition, and New Structural Economics 1 The Failures of Structuralism and Neoliberalism 2 New Structural Economics 3 The Failure of Structuralism and Washington Consensus: A New Structural Economics Perspective 4 Industrial Policy and a Facilitation State 5 New Structural Economics and a Call for Structural Revolution in Modern Economics 6 Concluding Remarks References Part V: The “New” New Comparative Economics: Broadening the Goals 22: Rethinking Development: Broadening the Goals and Altering the Approach 1 Introduction 2 Three Frames to the Challenge of Sustainable Development 2.1 Re-coupling Economic Growth and Household Well-Being 2.2 De-coupling Growth and Environmental Degradation 2.3 We-Coupling to Leave No One Behind 3 New Thinking About Economic Systems 4 Representative Institutional Shifts 5 The Policy Interaction: Agenda 2030 and the Sustainable Development Goals 6 Future Areas of Inquiry References 23: Explaining the Heterogeneity of Health Outcomes in Post-Communist Europe 1 Introduction 2 Part 1: From Stagnation to Collapse 3 Part 2: From Collapse to Recovery 4 Part 3: Explaining Comparative Health Outcomes in Transition Economies 5 Part 4: Focus on Russia 6 Conclusion References 24: Building the Good Life: Growth, Reforms and Happiness in Transition 1 Introduction 2 The Economics of Happiness: A (Very) Short Overview 3 Life Satisfaction in Transition: The Early Years 4 The Global Crisis and Its Impact on Well-Being 5 The Post-Crisis Years: Is the Happiness Gap Closing? 6 Building the Good Life—How to Make Rising Life Satisfaction Sustainable? 7 Conclusion References 25: Growth and Subjective Well-Being in China 1 Background and Motivation: China’s Economic Growth 2 Subjective Well-Being in Urban China: The Pattern from 1990 to 2015 3 Determinants of Subjective Well-Being in Urban China 3.1 Comparison to the Transition Countries of Eastern Europe 3.2 Macro-Level Evidence 3.3 Micro-Level Evidence 3.4 Urban China: Conclusion 4 Subjective Well-Being in Rural China and Its Determinants 4.1 Subjective Well-Being in Rural China: Overall Trends and Heterogeneity 4.2 Potential Determinants of the Subjective Well-Being Trends in Rural China 4.3 Summary of Rural Analysis 5 Conclusion References 26: Understanding Demographic Challenges of Transition Through the China Lens 1 Introduction 2 China’s One-Child Policy and Demographic Dividend Plan, and Associated Concerns 3 The Economic Logic of China’s “Getting Old Before Getting Rich” Concern 4 China’s EDT Approach to National Development 4.1 The First Tier: Expeditious Capture of the Demographic Dividend 4.2 The Second Tier: Advanced Post-Low-Wage Demographic Dividend Preparations 4.3 China’s Next-Phase Strategy for the Goal of Transition from “Poor-Old” to “Rich-Old” 5 Updating China’s 1980s-Derived “Old Not Rich” Fears 5.1 Countries Now Tend to Get Old Before—If Ever—Getting Rich 5.2 Prospective Differences Between “Poor-Old” and “Rich-Old” Economies 6 Eastern and Central Europe Within the Economic Demography Transition (EDT) Framework 6.1 Survey of Eastern and Central European Economies 6.2 A Global EDT Approach 6.3 Emigration 6.4 A Different Approach Going Forward 7 The EDT of Transition Economies in the Twenty-First Century References Part VI: Addressing New Issues by Comparative Analysis 27: Inequality and Well-Being in Transition: Linking Experience and Perception to Policy Preferences 1 Introduction 2 Economic Inequality in Transition Economies: Magnitude and Dynamics Over the Past 3 Decades 2.1 Measuring Economic Inequality: Concepts, Data, and Methods 2.2 Dynamics of Economic Inequality in Transition Economies 2.3 Perceptions of Inequality Changes 3 Inequality and Welfare 3.1 Macro Linkages Between Inequality and Welfare 3.2 Micro Linkages Between Inequality and Welfare 3.3 Inequality and Policy Preferences 4 Concluding Remarks References 28: Authoritarian Populism in Comparative Perspective 1 The Question 2 Populism 3 Classic Populism: Latin America 3.1 Context: Framework Conditions for Political Instability 3.2 Outcomes: Economics and Its Limitations; the Populist Cycle 4 Populism in Central Europe 5 Factors Behind Populism 5.1 Factors of Populism in Europe: A Set-Theoretic Analysis 5.1.1 Method 5.1.2 Results 5.1.3 A Further Empirical Illustration 6 Conclusions Appendix References 29: Does Emigration Affect Political and Institutional Development in Migrants’ Countries of Origin? 1 Introduction 2 Theoretical Perspectives 2.1 Hirshman’s ‘Exit, Voice and Loyalty’ 2.2 Levitt’s ‘Social Remittances’ 2.3 The Role of Monetary Remittances 3 Migration and Political-Institutional Change: Evidence 3.1 Effects of Emigration on the Country-Level Political-Institutional Outcomes 3.2 Effects of Migration on the Local-Level (Regions/Communities) Political-Institutional Outcomes 3.3 Effects of Migration on Individual/Household-Level Political-Institutional Outcomes 4 Discussion References 30: Understanding Tax Evasion: Combining the Public Choice and New Institutionalist Perspectives 1 Introduction 2 Economic Theory of Tax Evasion 3 Public Choice Approach 4 Introducing “Trust-Based Political Exchange” 4.1 A Conceptual Discussion of Trust 4.2 Adding Trust to Political Exchange 4.3 Tax Evasion and Trust in Transition Countries 5 An Empirical Test 6 Concluding Remarks and Policy Implications Appendix: Construction of Tax Evasion Variable from the Questionnaire References 31: The Rules of the Game in Transition: How Informal Institutions Work in South East Europe 1 Introduction 2 The Rules of the Game: Revisiting Formal and Informal Institutions 2.1 Differentiating Rules and Constraints: The ‘Enforcement Belt’ 2.2 Enforcement of Formal Rules and Informal Norms: The Effectiveness of Constraints 2.3 Differentiating Informal Institutions from Other Informal Regularities: ‘Trusted People and Connections’ versus Informal Networking in SEE 2.4 Stability of Norms versus Temporality of Practices: Capturing Interactions between Formal and Informal Institutions 3 Specifics of the Institutional Framework in the SEE Region: Transaction Costs of Informal Networks 4 Empirical Analysis of Formal-Informal Institutional Interaction in SEE 4.1 Informal Networking by General Public in SEE 4.2 Informal Networking by Entrepreneurs in SEE 5 Conclusion Appendix 1: Explanation of the SEE Sample and the Data Appendix 2 References 32: Entrepreneurship in Comparative Economics Perspective 1 Introduction 2 Varieties of Capitalism and Entrepreneurship 3 Three Analytical Approaches to Exploring the Relationship Between Varieties of Capitalism and Entrepreneurship 4 Dimensions of Entrepreneurial Regimes: A Conceptual Approach 5 Conclusions References Part VII: Methodologies for Comparative Analysis 33: Taxonomies and Typologies: Starting to Reframe Economic Systems 1 Introduction 2 A New Approach to Classifying Economic Systems 3 Data and Methods 3.1 Measuring Total Factor Productivity: Capital-Labour Substitution 3.2 Empirical Model 4 Results 5 Conclusions References 34: Institutional Complementarities in Comparative Capitalism: A Bibliometric Account 1 Introduction 2 Methodology and Data 3 Results 3.1 Main Trends in the Journal Literature 3.2 Themes 3.3 Methods 4 Discussion and Conclusions References 35: The Challenge of Identification and the Value of Descriptive Evidence 1 Introduction 2 Motivation 3 Data 4 Stylised Facts 5 Non-causal Interpretation of Association 6 Identification Strategies 6.1 Micro Methods 6.2 Micro-Macro Comparisons 6.3 Macro Methods 7 Conclusion References 36: Conclusion: So, What Is Comparative Economics Now? 1 Approaching a Conclusion 2 The Main Findings of Individual Contributions 3 The Big-Picture Lessons 3.1 Institutions and Varying Regime Characteristics Are Not Really Separable 3.2 Transition May Be Over, but Its Unique Experiences Carry Many Lessons for Future Analysis of (Economic) Development 3.3 Policies, Institutions and Historical Forces All Matter in Some Combination 4 Is There a Definition for the New Comparative Economics? Index