nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2005‒02‒01
five papers chosen by
Karl Petrick
Leeds Metropolitan University

  1. The Role of the State in Economic Transformation: Comparing the Transition Experiences of Russia and China By David M. Kotz
  2. Politics, Relief, and Reform: The Transformation of America's Social Welfare System during the New Deal By John Joseph Wallis; Price Fishback; Shawn Kantor
  3. INSTITUTIONAL INSTABILITY AND GROWTH IN ARGENTINA: A LONG-RUN VIEW By Leandro Prados de la Escosura; Isabel Sanz-Villarroya
  4. Vengefulness Evolves in Small Groups By Daniel Friedman; Nirvikar Singh
  5. FDI, External Accounts, and Income Distribution in Developing Economies: A Structuralist Investigation By Arslan Razmi

  1. By: David M. Kotz (University of Massachusetts Amherst)
    Abstract: This paper compares two radically different approaches to transforming an economic system based on central planning and state property into a capitalist system, the neoliberal transition strategy and the state directed transition strategy. Russia’s transition since 1992 is examined as an example of the neoliberal approach, while China’s transition since 1978 is analyzed as an example of the state directed approach. The primary explanation for China’s economically superior transition performance is located in the advantages of the state directed transition strategy. However, contradictions in a state directed transition strategy are identified which tend to promote an eventual shift toward a neoliberal strategy. JEL Categories: P27, P21, P52
    Keywords: transition, neoliberalism, state, Russia, China
    Date: 2005–04
  2. By: John Joseph Wallis; Price Fishback; Shawn Kantor
    Abstract: The American social welfare system was transformed during the 1930s. Prior to the New Deal public relief was administered almost exclusively by local governments. The administration of local public relief was widely thought to be corrupt. Beginning in 1933, federal, state, and local governments cooperatively built a larger social welfare system. While the majority of the funds for relief spending came from the federal government, the majority of administrative decisions were made at state and local levels. While New Dealers were often accused of playing politics with relief, social welfare system created by the New Deal (still largely in place today) is more often maligned for being bureaucratic than for being corrupt. We do not believe that New Dealers were motivated by altruistic motives when they shaped New Deal relief policies. Evidence suggests that politics was always the key issue. But we show how the interaction of political interests at the federal, state, and local levels of government created political incentives for the national relief administration to curb corruption by actors at the state and local level. This led to different patterns of relief spending when programs were controlled by national, rather than state and local officials. In the permanent social welfare system created by the Social Security Act, the national government pressed for the substitution of rules rather than discretion in the administration of relief. This, ultimately, significantly reduced the level of corruption in the administration of welfare programs.
    JEL: N3 N4 H0 H1 H4
    Date: 2005–01
  3. By: Leandro Prados de la Escosura; Isabel Sanz-Villarroya
    Abstract: Argentina has slipped from being among the ten richest countries in the world by the eve of World War I to its current position close to developing countries. What did originate Argentina’s economic retardation?. In this paper we employ a structural model to investigate the extent to which institutional instability, as captured by “Contract Intensive Money” (Clague, Keefer, Knack and Olson, 1999), conditioned capital accumulation and economic growth in Argentina and, consequently, the country’s relative international position. Our results suggest that institutional instability played a major role in Argentina’s unique historical experience of economic decline.
    Date: 2004–12
  4. By: Daniel Friedman (University of California Santa Cruz Dept. of Economics); Nirvikar Singh (University of California, Santa Cruz)
    Abstract: We discuss how small group interactions overcome evolutionary problems that might otherwise erode vengefulness as a preference trait. The basic viability problem is that the fitness benefits of vengeance often do not cover its personal cost. Even when a sufficiently high level of vengefulness brings increased fitness, at lower levels, vengefulness has a negative fitness gradient. This leads to the threshold problem: how can vengefulness become established in the first place? If it somehow becomes established at a high level, vengefulness creates an attractive niche for cheap imitators, those who look like highly vengeful types but do not bear the costs. This is the mimicry problem, and unchecked it could eliminate vengeful traits. We show how within-group social norms can solve these problems even when encounters with outsiders are also important.
    Date: 2004–04–01
  5. By: Arslan Razmi (University of Massachusetts Amherst)
    Abstract: The effects of FDI inflows on the external accounts of developing economies have been largely ignored in recent years. This paper contributes to filling this gap by developing a formal framework. Our economy consists of; (1) a non-tradable goods sector, and (2) a tradable goods sector in the form of an export processing zone operated by transnational corporations. The effects on the balance of payments are shown to depend on several interesting factors. By attempting to shed light on how various actors are affected by policy choices, this study highlights the political economy considerations involved as policy makers pursue various goals. The results raise concerns regarding recent trends in investment liberalization. JEL Categories: F21, F23, F41
    Keywords: Foreign direct investment, structuralist models, non-tradable goods, tradable goods, balance of payments, investment liberalization, export processing zones, wage suppression, performance requirements, distributional conflicts, real exchange rates.
    Date: 2005–03

This nep-pke issue is ©2005 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.