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Balanced or Unbalanced Development: Special Economic Zones as Catalysts for Transition

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  • John Litwack
  • Yingyi Qian
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    Abstract

    Journal of Comparative Economics, March 1998. We develop a theory for a transition economy under which an unbalanced development strategy that favors special economic zones emerges as a response to two critical problems: (1) political pressure to satisfy certain social expenditure requirements, and (2) the lack of institutions to constrain the state from expropriation. By promoting the concentration of resources in some areas, a low equilibrium trap can be avoided, while important spillover effects may be generated elsewhere. The experience of China with special economic zones and coastal open areas is interpreted in this light. Some problems in the Russian economy are also discussed in the context of this theory. Key Words: Unbalanced Development, Special Economic Zones, Political Constraint, Commitment, Transition Economies Journal of Economic Literature Classification Numbers: O20, P41, H30

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    Paper provided by Stanford University, Department of Economics in its series Working Papers with number 97044.

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    Handle: RePEc:wop:stanec:97044

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    Keywords: Unbalanced Development; Special Economic Zones; Political Constraint; Commitment; Transition Economies;

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    1. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
    2. Roland, Gerard & Verdier, Thierry, 1994. "Privatization in Eastern Europe : Irreversibility and critical mass effects," Journal of Public Economics, Elsevier, vol. 54(2), pages 161-183, June.
    3. Gerard Roland, 1994. "The role of political constraints in transition strategies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(1), pages 27-41, 03.
    4. Kornai, J., 1993. "Transformational Recession; A General Phenomenon Examined Through the Example of Hangary's Development," Harvard Institute of Economic Research Working Papers 1648, Harvard - Institute of Economic Research.
    5. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
    6. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
    7. Gordon, Roger H & Li, David Daokui, 1997. "Government Distributional Concerns and Economic Policy During the Transition from Socialism," CEPR Discussion Papers 1662, C.E.P.R. Discussion Papers.
    8. Laban, Raul & Wolf, Holger C, 1993. "Large-Scale Privatization in Transition Economies," American Economic Review, American Economic Association, vol. 83(5), pages 1199-1210, December.
    9. Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62, pages 143.
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    Cited by:
    1. World Bank, 2011. "Russia : Reshaping Economic Geography," World Bank Other Operational Studies 13052, The World Bank.

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