Intergenerational income mobility and economic freedom

Numerous studies have found that income inequality reduces the chances of upward relative mobility (i.e., climbing up the income ladder). However, most of this work ignores the role played by institutional quality (namely, economic freedom) in determining mobility and increasing the individual's set of choices. We fill this gap by empirically testing the direct and indirect (through economic growth) impacts of economic freedom on intergenerational income mobility. We find that economic freedom has both direct and indirect effects on intergenerational income mobility, while income inequality is a strong predictor of downward income mobility. When we incorporate findings about the purely mechanical relationship between inequality and intergeneration income mobility, we find that the legal system and property rights component of economic freedom matters more than inequality. These results suggest that good institutions can increase intergenerational income mobility.     

Political and Economic Inequities and the Shaping of Institutions and Redistribution

This article studies the joint effect of political and economic inequalities on redistributive taxation and institutional quality. The theoretical model suggests that income inequality, coupled with political bias in favor of the rich, decreases redistribution and lowers institutional quality. The effect of the former is to increase productive investment, and the effect of the latter is to decrease it—with resulting ambiguous implications for economic growth. Testing these predictions empirically in a panel of countries, we find that inequality has a negative effect on both institutional quality and redistribution.     

The Impacts of Economic Freedom and Institutional Quality on Migration from African Countries

The previous empirical literature suggests that socio-economic conditions and demographic pressures are triggering factors of migration from Africa. We propose that economic freedom and institutional quality indicators of African countries are also important determinants of out-migration from Africa. Hence, we investigate the effect of economic freedom and institutional quality on migration flow from 44 African countries to major migration destination countries. Aggregate indicators are derived for the quality of institutions and economic freedom using principal component analysis. Controlling for source and destination countries' income levels, population size, cultural, historical and physical distance, our findings provide evidence that migration flow from Africa is significantly determined by the institutional quality and economic freedom indicators in African countries. Our results are strongly robust to different econometric techniques used to control for sample selection bias, zero-valued observations and endogeneity concern. Hence, improving institutional quality and maintaining economic freedom in African countries matters significantly to control out-migration from Africa.     

The impact of Chinese government promoted homestead transfer on labor migration and household's well-being: A study in three rural areas

The rural homestead transfers (RHT) promoted by the Chinese government in the recent years have resulted in major economic and landscape changes in the countryside and profound impacts on the households’ well-beings. Our paper aims to explain the complex relation between RHT, labor migration and households’ well-beings, based on a survey about three pilot rural areas (Changyuan, Yiwu and Wujin, in the Henan, Zhejiang and Jiangsu Provinces). The results found that the transfer has directly influenced the farmers’ income status, and indirectly through labors’ migration. RHT had a positive impact on their residential environment, and poorly improved their social security. It has improved the living standard of the households, positively influenced the farmers’ psychological state, and had very limited influence on their political participation and freedom.     

The logic - and limits - of Chinese socialist development

In many ways 1949–1955 was a golden age of Chinese socialism because progress in cooperation was achieved with minimum violence. When the pace was forced after that, peasant mistrust grew. Successes in the Great Leap and the Cultural Revolution were short-lived, illusory, or at best in the earlier period there were fewer zig-zags in ideology and in economic policy of the sort which came with the Great Leap. However, wild swings of this kind are apt to divert us from the continuities which come out of the power structure, the class structure and the decision to promote a rapid rate of economic growth. These include the institutional transformation of the economy; economic planning; expanded state welfare functions; the effort to avoid foreign dominance; elimination of exploitation and of certain kinds of social inequalities. The limits to socialist development appear to be set by the size of agricultural surplus that can be extracted without exacerbating tensions and the high rate of investment that industrialization requires. On the political front, the limits are set by peasant attitudes to government policy, the power of structural hierarchies (and their associated vested interests) and excessive Party interference in areas of social life best left to more democratic decision-making processes.     

Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment

This paper investigates how financial, trade, institutional and political liberalisation policies have affected financial sector competition in Africa using updated data to appraise second‐generation reforms. The “freedom to trade” and “economic freedom” indices are employed. Hitherto, unexplored financial sector concepts of formalisation, semi‐formalisation, informalisation and non‐formalisation are also introduced. The following findings are established. First, relative to money supply, (i) with the exception of the economic freedom mechanism, liberalisation policies have generally decreased the growth of the formal financial sector to the benefit of other financial sectors; (ii) apart from the foreign direct investment and economic freedom channels, liberalisation policies have been fruitful for semi‐formal financial development at the cost of other financial sectors and; (iii) with the exception of economic freedom, both the informal and non‐formal sectors have developed owing to liberalisation to the detriment of the formal financial sector. Second, relative to gross domestic product, the semi‐formal, informal and/or non‐formal financial sectors have also generally improved as a result of liberalisation. Policy implications are discussed.     

Mercantilism and urban inequalities in eighteenth-century Sweden

Abstract

It is sometimes argued that inequality promotes growth. If savings are the key to economic growth and the marginal propensity to save rises with income, a more unequal society will save more and grow faster. Thus, by sacrificing equality and concentrating income and wealth in the hands on the entrepreneurial class, society might enjoy higher economic growth. The economic policies taken by the Swedish state during the eighteenth century had the explicit goal of concentrating trade and opportunities for income formation and capital accumulation in the hands of the merchant class. Both an older tradition as well as recent research have emphasised the positive sides of these policies, as the privileged merchants are depicted as dynamic engines of growth and an important factor in the process of capital accumulation. However, in this paper it is argued that this assertion is not warranted. The mercantilist policies resulted in neither measurable per capita growth nor dynamic transformation but in institutional rigidities and the enrichment of the rich and impoverishment of the poor, leading to increasing urban inequalities.     

The political economy of income distribution in South Korea: The impact of the state's industrialization policies

A number of previous studies of economic growth and income distribution in South Korea, based largely on 1960s data, concluded that South Korea was an exception to Kuznets' ‘inverse U-pattern’ of income inequality. Also, it was regarded as an exception to the usual negative consequences predicted by dependency theory for an economy so dependent on foreign capital and world markets. This author presents more recent data — for the 1970s and early 1980s — in order to support his claim that the trend toward income equality that appeared in the 1960s was reversed in the 1970s. The author develops a thesis that stresses the role of the state in shaping the Korean political economy. He argues that it has been the strong South Korean developmentalist state in firm control of both domestic and foreign capital and its export-oriented industrialization policies that have been the principal determinant of the pattern of income distribution. He contests the usual explanation related to the level of economic development or external dependency per se.     

Does institutional freedom matter for global forest carbon sinks in the face of economic development disparity?

Mitigating global warming is the responsibility of all countries. Moreso, the role of forests in sequestrating carbon is very crucial. Most environmental organizations are active in protecting the environment according to their objectives. This paper investigates the relationship between institutional freedom and forest carbon sinks by using a panel threshold model with 139 countries to verify the U-shaped relationship between forest carbon sinks and economic development. The U-shaped curve between forest carbon sinks and economic development is the same as the environmental Kuznets curve. The impact of institutional freedom on forest carbon sinks under different economic development thresholds is analyzed. Institutional freedom harms forest carbon sinks when the country experiences lower economic growth. Further analysis shows that when economic development is high, there are positive effects, and the beneficial effects of institutional freedom on the forest carbon sink gradually enhance as the threshold value increases. The article clarifies the relationship between institutional freedom and forest carbon sinks and also provides implications for making forest management strategies and climate mitigation policies.     

Economic Inequality and Its Socioeconomic Impact

Income inequality is of fundamental interest not only to economists, but also to other social scientists. A substantial literature in economics and the social sciences has investigated the relationship between income inequality and economic growth, and a variety of social phenomena. The links between inequality and economic growth are explored as well as those between inequality and such key social variables as political conflict, education, health, and crime. The analysis in this paper follows a two-step process. First, a review of the empirical evidence relating inequality to growth and to each of the above social variables is undertaken. Second, the various causal mechanisms that have been proposed in the social science literature to explain those links are surveyed.     

Peasant labour for urban industry: Temporary contract labour,urban-rural balance and class relations in a Chinese county

Urban-rural relations in China have a dual character: while a higher level of urban-rural economic balance than most other countries has been achieved, a sharp structural cleavage between workers and peasants has been maintained, based mainly on strict household registrations. Peasants are prevented from migrating to towns and gaining employment there, except under specially approved contracts arranged to resolve local shortages of industrial labour. Contract labour has complex and important effects on rural and urban industrial development. It also embodies the duality of urban-rural relations in China: at the same time as it redistributes wage funds from urban to rural areas, it reinforces the class cleavage between workers and peasants (including contract workers). It also opens up a complex web of inequalities and cleavages among those peasants with contract work and those without. Contract workers have been placed in a contradictory class position which has been a flashpoint of political conflict. The relationships of contract labour to urban industrial and rural development, urbanization, urban-rural balance and structural cleavage, class structure and political conflict are examined through a study of Shulu County, an ordinary rural area with agrowing industrial centre in which over half of the industrial labour force is comprised of peasant contract workers.     

The road to liberalization: Policy design and implementation of Taiwan’s privatization

Among newly industrializing economies, Taiwan represents an archetypical example of a country in the process of economic catching up with institutional environments standing somewhere between Western and transition countries. Thus, Taiwan’s privatization experience may provide a means to assess the generalizability of conclusions drawn from prior research conducted in both kinds of countries. In the face of changing economic and political environments, Taiwan revamped its blueprint for privatization in 1989 as a major plank of its economic shift toward liberalization. Although it has proceeded on a trial-and-error basis, the policy has thus far yielded substantial though mixed results. This study systematically reviews Taiwan’s policy design and implementation of privatization, which originally was modeled on but later diverged from the Western experience as a result of the immature institutional settings and political compromises in various regards. Taiwan’s privatization, in a relative small scale to those in transition economies, is characterized by a set of stylized policy initiatives that provide a reference point for other developing countries.

The trend of the Gini coefficient of China (1978–2010)

ABSTRACT

This study proposes a new approach to analyse the effects of an overlap term on the calculation of the overall Gini coefficient and estimates China’s Gini ratios since the adoption of the economic reform and open-door policies. A decomposition of the Chinese Gini coefficient for 1978–2010 reveals that the key factor contributing to income inequalities is the income disparity between rural and urban inhabitants. We further investigate the features of this income inequality between rural and urban areas and employ statistical approaches to evaluate the effects of urbanisation and rural-to-urban average income on nationwide income inequality. The results show that accelerating the pace of urbanisation is mainly responsible for decreasing China’s income disparity. Drawing on these results, we conclude with suggestions for related policies.     

Notes on neoinstitutional economics

Abstract

In mainstream economic theory — neoclassical economics — one had for a long time taken for granted that the institutional framework of social interaction had to be treated as something exogenously given and beyond the explanatory and analytical realms of theory. Institutions were for sociology and political science to handle, not for pure economics. More recently, however, the scope of economic theory has been widened through the incorporation of institutions. This has to a large extent grown from an increasing awareness of the farfetched consequences of the institutional presumptions on which much of the earlier theorizing was built. The analysis is therefore broadened by supplementing the hard core with institutional analysis. One has even attempted to explicate the economic rationale of the formation or sustenance of institutions by endogenizing them, e. g. by applying different kinds of evolutionary theories.     

China's Surplus Agricultural Labour Force: It's Size,Transfer, Prospects for Absorption and Effects of the Double-Track Economic System*

The commune economy had two basic characteristics: one was its three-grade pyramid-type structure of organisation which integrated government administration and economic management; and the other was its “self-sufficient” and “closed-door” character. Under this system farmers had no free choice about their occupation and place of residence. With the collapse of the commune system, institutional reorganisation of China's rural economy occurred. Farmers had more choice now about their production, their occupation and place of residence based on the development of a modern commodity and market economy. In this process of institutional reorganisation, transfer of surplus agricultural labour is a key factor. The concept of the agricultural labour surplus is discussed and discussions in English of this concept and associated theory and policy are reviewed. With reform of rural economy and improvement of agricultural labour productivity, the quantity of surplus labour in rural China has increased. Greater labour absorption is required in both agricultural and non-agricultural sectors, but particularly in non-agricultural sectors. In China, several impediments to transfer of surplus agricultural labour still exist. The transfer of surplus agricultural labour in contemporary China occurs in the context of a nationwide “double-track” economic system (a market-oriented economic system harnessed to a centrally planned and controlled economic system) and a “dual economy” in which modern industries exist alongside a traditional indigenous agricultural economy. Income gains provide the main motivation for farmers to transfer to non-agricultural activities. It is the income difference between farming and non-farming activity, not whether the marginal labour productivity in farming is zero that is important. By building and developing free or open markets one provides a suitable climate for labour transfer and migration. In the absence of free or open markets, farmers have little free choice. The continuing system of household registration is a serious institutional barrier to transfer or migration by farmers. Furthermore, the system of equal farmland contracts also hinders the process of transfer or migration. This might be overcome by allowing the transfer of rights to use farmland and facilitating “part-time” transfer of agricultural labour. Withdrawal of “surplus labour” from farming can cause grain output to drop. This can occur because if “better” farmers leave agriculture, the quality of farm labourers as a whole declines and because of a rigid price system which discriminates against agricultural products. While current transfers of surplus agricultural labour in China may well have increased income inequality between rural residents and between regions, if there had been greater freedom of migration this might have resulted in less income inequality. To the extent that market reform in China has resulted in greater freedom of economic choice, it appears to have increased the level of production obtained from China's limited resources. This is not to say that the market system will result in a perfect solution even though the economic results can be expected to be much superior to the commune system adopted in the past by China.     

Muslim conquest and institutional formation

Recent studies suggest that Muslim military conquest (632–1100 CE) generated an institutional equilibrium with deleterious long-run political economy effects. This equilibrium was predicated on mamluk institutions: the use of elite slave soldiers (mamluks) and non-hereditary property rights over agricultural lands to compensate them (iqta). This paper evaluates this historical narrative by exploring the accuracy of its initial step. Using a difference-in-differences strategy, I show that conquest changed institutions in conquered territories. I then provide suggestive evidence that the presence and efficacy of mamluk institutions affected this institutional configuration and that leaders survived longer in power during the conquest period.     

艾滋病、全球化和人的安全

艾滋病问题与全球化是互为因果的关系,它的泛滥源于当今社会存在的诸多不平等与不公正问题,虽然其紧迫性并未像气候变暖或金融危机等全球化问题那么显著,但艾滋病问题依然是理解全球化的多重含义以及当今世界政治、社会、经济和文化权力运作方式的一个重要视角。美国的艾滋病救助政策体现了艾滋病问题所具有的安全含义,但它到底在多大程度上是出于利他主义的考虑,令人值得怀疑。自2000年艾滋病问题成为联合国安理会的议题以来,人们开始重新思考它对传统安全观所带来的冲击,虽然没有经验证据表明艾滋病问题助长了一国国内的冲突,但艾滋病加速恶化与国内的冲突现状密切相关。作者认为,对于艾滋病疫情的预防与应对,国际援助固然重要,但各国政府必须把自身资源投放到艾滋病的综合性预防、护理以及支持项目当中。     

Labour policy in the plantation islands

This article studies the evolution of labour policy in the context of the political economy of plantation islands. In order to analyse the relationship between labour policy and various institutional factors (social, political and economic), the author discusses the development of the plantation system — its origins based on slavery and indentures, and subsequent changes resulting from problems of cultural pluralism, labour productivity, falling world market prices, and a general process of economic modernization. He concludes with a discussion of the changes in industrial relations and government labour policy which emerged after the Second World War as a result of the changed constitutional status of the islands as well as the population explosion.     

Innovation or Rent-seeking： The Entrepreneurial Behavior during China＇s Economic Transformation

Although achieving impressive economic growth during the economic reform period, China has been plagued by rampant corruption and a widening income gap. How can the coexistence of these two phenomena be explained？ In this paper, we argue that before 1994, the coexistence was induced by a series of expediential institutional arrangements to stimulate entrepreneurial activities and after 1994, it was entrenched because of the slow progress in the overall reform toward becoming a market economy and because of inappropriate government actions and the lack of government action in institutional building. To solve these problems, economic and political reforms need to be accelerated to improve market institutions and to establish the rule of law.     

Managing Risk in Africa Through Institutional Reform

African economies have experienced weak levels of growth in per capita income over the past decade. While standard models of growth suggest institutional governance as one key to success, thus far little attention has been given to the role of risk in institutional reform. In this paper, we use a nested panel regression model to estimate the economic value of institutional reform on economic growth, with data for 30 Sub-Saharan African countries from 1980–2004. Our findings provide a basis for measuring the economic value of institutional reform through its impact on reducing aggregate country risk.