Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economic democracy wikipedia , lookup
Non-monetary economy wikipedia , lookup
Workers' self-management wikipedia , lookup
Ragnar Nurkse's balanced growth theory wikipedia , lookup
Transformation in economics wikipedia , lookup
Rostow's stages of growth wikipedia , lookup
Comments on “Socialist Growth Revisted: Insights from Yugoslavia” Evan Kraft American University YES Conference, Dubrovnik June 2015 Contributions of the paper • Model-based assessment of determinants of Yugoslavia’s economic growth • Brings up to date older growth-accounting work such as Sapir (1980) • In line with recent literature reflecting on Communist economies’ ability to sustain fairly rapid growth for a certain period of time (eg. Broadberry and Klein 2011 for Czechoslovakia) • Potential contribution to understanding role of economic institutions Findings of the paper • TFP growth accounts for increasing share of growth over time • Growth slowdown after 1979 mainly due to labor wedge The model: Chari, Kehoe and McGrattan (2007) • Decompose deviations of output growth from trend into four frictions: • • • • Efficiency wedge (time-varying TFP growth) Labor wedge (labor income tax) Investment wedge (investment tax) Government consumption wedge (government consumption and net exports)—in this paper called Income wedge • Argument is that factors affecting growth can be bunched into these categories for further analysis • Acknowledge that these are reduced forms, so that the wedges are not representations of the underlying model. • Example: an economy with sticky wages and monetary shocks maps into a growth model with labor wedges. Christiano and Davis (2006): critique • Show that wedges may not be independent • Credit market imperfections that generate investment frictions may also increase labor wedges, for example • If so, identification of origins of frictions is unclear • Also, the form of the friction may matter • Get very different results for an “ROE tax” rather than a direct tax on investment. In the case of the US Great Depression, credit market frictions of this form, a la Bernanke, Gertler and Gilchrist, can explain a great deal of output variation, while the direct tax formulation used by Chari et al does not explain much output variation • (My own comment—growth really is not endogenous in this approach. The trend rate of growth of labor augmented productivity growth is a fixed parameter. Only wedges can change) What happened to Yugoslav growth? • Key turning point: 1979-81 • Economic event: sovereign debt crisis • How should this show up in the model? • Obvious effect should be difficulty accessing credit—investment wedge? • Research by Vodopivec (1989) and Kraft and Vodopivec (1992) shows large importance of “soft-budget” finance through • Discretionary tax and subsidy policies • Inflationary gains and losses, reaching great importance as inflation rises in the 80’s • Regional redistribution—enterprises in Slovenia are net payers, all others net receivers, with receipts correlated with income per capita What reforms were undertaken after 1979? • Few systemic reforms until 1988 • Initial austerity, export at all costs mentality (potentially decreasing efficiency) • Policy vacillation • Sharp decrease in personal incomes, rise in unemployment, rise in inflation • Increase in labor unrest, especially in the second half of the 1980’s, but not clear how much effect this had on output • How should this show up in growth accounting? Periods and breakpoints • Several other years could perhaps be examined as breakpoints • 1961: end of grant funding from West • 1965: major economic reform, including major effects on labor supply (freedom to travel leads to outmigration) and labor demand (greater decision-making power for companies probably decreases labor demand). • 1971: reaction against reform, beginning of new “self-management agreement” period • 1974: new Constitution • 1976: Law on Associated Labor—major new labor code • Could be worthwhile to examine these sub-periods • Also, 1970’s are critical • Failure to adjust to energy shocks • Increasing foreign debt • Similar to Poland more than Czechoslovakia Labor market distortion: history • Firms were labor managed for the whole period under study • Open unemployment is seen from the mid-1960s at least • Self-management agreements created detailed wage determination structures in 1970s • Set by bargaining process • But strong Communist Party influence, pressure to limit wage disparities • One would think that distortions would have increased substantially when this system was introduced in the mid-1970s • But in the 1980’s, firms were required to increase hiring based on numbers given in Republic-level self-management agreements • Would this account for labor wedge? Some deeper digging here could be very helpful. Regional issues • Aggregate data may be misleading in a country where GDP/capita in the most advanced republic was 7-8 times that in the least advanced autonomous region • Productivity differences associated with skill may vary: a PhD in the more advanced regions may be substantially more productivityenhancing compared to secondary education than a PhD in the lessdeveloped regions • In other words, returns to schooling may have varied considerably across Yugoslavia • This could pose issues for the conversion of educational attainment into Mincerian human capital To what extent was Yugoslavia a market economy, and how does this affect modeling? • Government involvement in investment decisions decreased after 1965— central General Investment Fund closed • But Republic level influence remained strong, perhaps underplayed in paper • Major projects clearly decided on non-economic basis by Government • Belgrade-Bar railroad • Aluminum, steel factories in each Republic held up as major new source of inefficiency post 1971 • Can we distinguish between • Inefficient investment decisions taken directly by Government--policy • Tax/regulatory frictions--system • Influence of worker-management--ownership? Potential payoff: different story • Broadberry and Kline, along with many others, point to inability of socialist systems to make transition from “extensive” to “intensive” growth • But Yugoslav case shows inability to continue technological imitation • Part of this is macro-level inability to manage foreign borrowing (a common story in the 1970’s) • Part of this is micro-level inefficiencies (labor and capital allocation mechanisms)