Premium Essay

Economic Liberalization, the Changing Role of the State and ‘‘Wagner’s Law’’: China’s Development Experience Since 1978

In: Business and Management

Submitted By fry1990
Words 10633
Pages 43

World Development Vol. 33, No. 5, pp. 729–743, 2005 Ó 2005 Elsevier Ltd. All rights reserved Printed in Great Britain 0305-750X/$ - see front matter


Economic Liberalization, the Changing Role of the State and ‘‘Wagner’s Law’’: China’s Development Experience since 1978
DAMIAN TOBIN * CeFiMS, SOAS, University of London, UK
Summary. — The paper applies Wagner’s Law of increasing state activity to illustrate the changing function of the state in China as a consequence of economic liberalization. Wagner’s Law describes the association between increasing national wealth in progressive states and the rise in state activity and expenditure. This indicates that the causes of bureaucratic expansion are to be sought, not just in terms of political pressures, but the interplay between political considerations and the economic necessities, resulting from the emergence of new property rights. A simple illustrative model is developed to measure the effects of increasing national wealth and the growth of the public sector. This suggests that the patterns of economic development observed by Wagner in 19th century Europe are not unlike those observed in China today. Ó 2005 Elsevier Ltd. All rights reserved. Key words — Asia, China, economic growth, public sector

1. INTRODUCTION The relationship between economic growth and the size of the state sector has long been a topic of interest for public policy practitioners and academics alike. Throughout history, the role of the state has been critical in determining particular economic outcomes. Research in this area has in general focused on how economic policies impact upon economic growth. Keynesian theory, for example, indicates that given the existence of idle capacity and other resources, increased government expenditure will increase national income.…...

Similar Documents

Free Essay

Economic Reform in China Post 1978

...First of all I will discuss China’s historical background and its need for reform and also how economic reform started out in 1978. Then I will go on to cover the four major economic institutions that needed to be reformed in order for China to become a market economy. These four major economic institutions will then be discussed in detail. This paper will then go briefly into China joining the WTO and will conclude with China’s economic situation at present. Chinese economic policies and institution have undergone a number of extreme changes since the establishment of the Communist regime in 1949. After the Communist Party took national power in 1949, the disorder caused by the imperialist invasions and domestic wars were put to an end and China began to strive for development by following Russia’s example in pursuing Leninist and Marxist doctrine. By following this doctrine they would replace free market and private ownership with socialist planning and public ownership. In order for this to become a reality China had to pursue radical revolutionary domestic and foreign policies to overcome the resistance to the Chinese Communist movements. After closing its doors to western concepts of capitalism and free market economy it seemed like China was doing well but it was soon evident that the rigid planning and the command market economy was becoming inefficient. In contrast to the western economies China was indeed falling behind. Even China’s neighbors such as Taiwan,......

Words: 2342 - Pages: 10

Free Essay

Role of Rcc in Socio Economic Development

...largest city in the northern part of Bangladesh. It stands by side of Padma. Rajshahi was known an important business place for a long time ago and the river played a significant role to transport. Padma lost its fierceness day by day due to farakka damp and other reasons. But Rajshahi city still contains its own glory. In the British era and, before and after the liberation war of Bangladesh, the contribution of the people of Rajshahi is remarkable. The famous historian Sir Jadunath Sarker, Khan Bahadur Emaduddin, Madar Bux, Dr. Samsujjhoha, A.H.M. Kamaruzzaman and many others played a crucial role for the betterment of the people of this area as well as the country. Rajshahi was very important from a long time ago due to geographical, political, economic, educational reason and others. It was first declared as district town in 1825 in the British era, and in the then time it was known as Rampur-Bowalia. It was a famous trade port. The Rampur-Bowalia Municipal Town Committee was formed in 1869. The Municipality started from 1st April in 1876. After passing a long time now we have Rajshahi City Corporation, started its journey in 1987. In the min time a lots of things have been changed but the objective remain the same. Rajshahi City Corporation is trying heart and soul for the socio-economic development of the people which was started in 1876. The corporation is an autonomous body which is operated by the elected people. The head of the organization is titled ‘Mayor’ who is......

Words: 10969 - Pages: 44

Premium Essay

The Role of Entrepreneurship in Economic Development of Nigeria

...European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 4, No.8, 2012 The Role of Entrepreneurship in Economic Development: The Nigerian Perspective Dr. Mrs Ann Ogbo AGU CHIDIEBERE NWACHUKWU Dept. Of management, University of Nigeria, Enugu Campus. PMB 011 *E mail of the correspondence author: Abstract The aim of the paper is to develop and analyse the contributions of entrepreneurship in the economic development through SME development in Nigeria. A total of 100 SMEs were randomly selected from a cross section of a population of all SMEs spread around some states of Nigeria and covering virtually all forms of enterprise. Participants were selected through a simple random sampling. The responses to the questionnaires were complemented with personal interviews of some SMEs operators. The responses of the participants were analyzed using the statistical package for social sciences (SPSS), which generated the frequency distributions, means, standard deviations, chi-square statistics, analyses of variance, etc of the responses. The hypotheses of this research which were tested at 0.05 level of significance using chi-square statistics hinged on identifying the greatest problem which SMEs face in Nigeria, the identification and ranking of the top ten problems or challenges of SMEs in Nigeria and the relationship between the form and nature of the business enterprise and its sources......

Words: 7375 - Pages: 30

Premium Essay

The Fundamental Institutions of China’s Reforms and Development

...Journal of Economic Literature 2011, 49:4, 1076–1151 The Fundamental Institutions of China’s Reforms and Development Chenggang Xu* China’s economic reforms have resulted in spectacular growth and poverty reduction. However, China’s institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the “China puzzle,” this paper analyzes China’s institution—a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China’s reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure. ( JEL O17, O18, O43, P21, P25, P26) 1. Introduction hinese economic reforms, which have been in flux for three decades, have more than doubled China’s economic growth, from an average of 4.4 percent annually before 1978 to an average of 9.5 percent after 1978. * University of Hong Kong and WCU–SNU. The first draft of this paper was written at Hong Kong University of Science and Technology (HKUST) when I was visiting there. The hospitality and generous support of HKUST are greatly appreciated. Comments from participants in conferences and seminars at the......

Words: 46258 - Pages: 186

Premium Essay

Role of Women in Economic Development

...Women’s Role in Economic Development: Overcoming the Constraints BACKGROUND RESEARCH PAPER Sarah Bradshaw, Joshua Castellino and Bineta Diop Submitted to the High Level Panel on the Post-2015 Development Agenda This paper reflects the views of the author and does not represent the views of the Panel. It is provided as background research for the HLP Report, one of many inputs to the process. May 2013 Women’s role in economic development: Overcoming the constraints Background paper for the High-Level Panel of Eminent Persons on the Post-2015 Development Agenda Prepared by Dr. Sarah Bradshaw, Principal Lecturer, Middlesex University with Dr. Joshua Castellino and Ms. Bineta Diop, Co-Chairs of the Sustainable Development Solutions Network Thematic Group on the “Challenges of Social Inclusion: Gender, Inequalities and Human Rights” 20 May 2013 1 1. Introduction This short paper aims to highlight the important role women have and can play in economic development. It addresses three questions: what is the evidence base to support investing in women? What are the current constraints on realising the full potential of women in the process of economic development? What are the priority areas of intervention necessary to unblock these constraints? It is focussed on women and on economic development, rather than on the wider issue of gender and development. However, before looking at the evidence base, constraints, and interventions, it will provide a brief......

Words: 4100 - Pages: 17

Premium Essay

Changing Role of Women Since 1865

...The Changing Role of Women Since 1865 “It can be said that the feminist movement has resulted in action and legislation; that in consciousness-raising it has found a new technique and self-realization; that at its very best it has counseled that men as well as women should be able to do and to be whatever they wish- and that if this involves men staying at home while women work, so be it” (Banner, 1974, p. 250). Women have come a long way since the late 1800s. They have fought many hard battles to change the way they were viewed in American society and have achieved much over the decades. The movement of women’s rights and being treated as an equal to men has been part of history for well over 100 years as women fought to be heard by obtaining a higher education, equality in the job market and in the voting booth. “Before the Civil War women could attend only three private colleges. After the war they had new ones all their own, among them Smith (1871), Wellesley (1875), and Bryn Mawr (1885)” (Davidson et al., 2008, p. 587). In the 1920s, a woman with a college education was part of a small advantaged group. The female students were discriminated against and in some cases, were asked to withdraw from courses so that a man could take her place in the classroom. Women were not taken seriously in the college setting. Men were the ones with the bachelor’s or master’s degrees at a rate of two to one. However, by 1970 this rate did change. For every five men that......

Words: 3105 - Pages: 13

Premium Essay

Role of Entrepreneurship in Economic Development

...Role of Entrepreneurship in Economic Development Entrepreneurship: Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk taking appropriate to the opportunity and through the communicative and management skills to mobilize human financial and material resources necessary to bring a project to fruition. According to A. H. Cole, "Entrepreneurship is activity of an individual, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services." According to Schumpeter, "Entrepreneurship is based on purposeful and systemic innovation. It included not only the independent businessman but also company directors and managers who actually carry out innovative functions". Need For Entrepreneurship Development: Economic development essentially means a process of upward change whereby the real per capita income of a country increases over a period of time. Entrepreneurship has an important role to play in the development of a country. It is one of the most important inputs in economic development. The economic history of the presently advanced countries like USA, Russia and Japan supports the fact that economic development is the outcome for which entrepreneurship is an inevitable cause. The crucial and significant role played by the entrepreneurs in the economic development of advanced countries has made the people of developing and under developed countries......

Words: 1047 - Pages: 5

Free Essay

Ambiguous Property Rights in China's Economic Transition

...The evolving nature and implications of ambiguous property rights in the case of China and its non-state sector as a transitional economy; can they be efficient? Index Introduction I. Past to present People’s Republic of China, towards transition Property rights, defined p. 3 p. 3-4 II. III. p. 5-6 The Chinese Model p. 6-8 Evolution vs. Big Bang, and the employment of ambiguous property rights Current p. 8-11 China, mid-transition and the functionality of ambiguous property rights in transition Future China, post transition, and does one size fit all? p. 11-12 IV. V. Conclusion Bibliography p. 13 p. 14-15   2   Introduction China’s remarkable and unmatched growth of the past decades, regardless of it ambiguous property rights and a relatively weak legal framework, have puzzled governments and economists to date. The contrast between China’s transitional economy and those in Eastern Europe and the former Soviet Union could not be more striking. Whereas the transition of the latter two has been a struggle and have sparked recession, China’s transition has brought about an economic boom and its gradual reform path has challenged the belief that gradual reform and public ownership cannot work as a transitional strategy. This paper aims to analyse the Chinese Model of economic transition with a focus on the structure of property rights in the system, primarily in the rural sector. First, a brief historic background of China and its...

Words: 3656 - Pages: 15

Free Essay

Corruption and China’s Economic Reform in the Early 21st Century

...Corruption and China’s Economic Reform in the Early 21st Century by Gregory C. Chow, Princeton University CEPS Working Paper No. 116 October 2005 Acknowledgement: I would like to thank Steven Kou of Columbia University and Yan Shen of Peking University for helpful comments and the Center for Economic Policy Studies at Princeton University for financial support in the preparation of this paper. Abstract Past economic reform of the state sector in China consisted mainly of privatization, of agriculture and of small and medium-size state enterprises, leaving large state enterprises in the control of the state. Current reform consists of making state-owned enterprises and banks more efficient and functioning like private enterprises, and gradual privatization of some large state enterprises. Bureaucrats managing state assets and the selling of assets take advantage of such power to benefit themselves, including embezzlement of public funds and taking bribes from citizens needing their help, as can be found in state enterprises, state-owned commercial banks and in government projects. Reducing the size of the government sector is a basic solution to the corruption problem in China while attention should be paid in the privatization process which can involve corruption. Outline 1. Introduction 2. Review of Past Reform Measures and Current Problems 3. Enterprise Reform Hindered by Bureaucratic Behavior 4. Reform of Banking and Financial System Hindered by......

Words: 8792 - Pages: 36

Premium Essay

Understanding China’s Economic Development

...Key Definitions Computable General Equilibrium (CGE): A model, which utilizes actual economic data to estimate the impact of external shocks (e.g. policies, technology) to an economy. Gross Domestic Product (GDP): The total monetary value of all officially recognized final goods and services produced within a country in a specific time period. It is used as a key measure of economic growth. Gini Coefficient: A statistical measure of the income distribution of a country’s residents. It helps to identify the gap between the rich and poor. Total Factor Productivity (TFP): A measure, which represents the amount of output not directly related to the amount of inputs (e.g. materials). Economic planners look at these factors to explain growth of a corporate or national economy. Main Facts Hofman & Kujis argue that economic growth in China is not only reflected by GDP growth but also its sustainability should be considered. China’s economic growth has been exceptional, as it has lifted millions out of poverty. Overall, the Chinese population has prospered greatly, however the Gini coefficient indicates that there is a significant income disparity. Furthermore, the Chinese economy is heavily dependent on the manufacturing industry, investments and external demand. These three cause multiple negative externalities for the nation, such as environmental pollution, dependency on foreign resources due to high-energy consumption and income inequalities that cause social...

Words: 724 - Pages: 3

Premium Essay

The Importance of the International Trade for China’s Development

...The importance of the international trade for China’s development With the development of the technology and the cooperation among the varieties countries,international trade is playing a irreplaceable role in the world stages.China has achieved a great development since participated in World Trade Organization(WTO).Therefore, I want to express some of my opinions about the importance of the international trade for China’s development.Obviously, we can divide two parts of China’s international trade since,1949 .On the one hand,Chinese economy is likely to a self-sufficient society which is from 1949 to 1978.On the other hand,China has taken a policy which named Opening and Reform, China began to do international trade with all the countries.Compare to the self-sufficient society period, we have witnessed a great development and experienced a lot of benefit that brought by the international trade since 1978,so I will use some examples and my daily experiences to support the importance for the China’s development.First of all ,international trade can meet most of the needs of China’s economy.Besides this advantages,international trade can offer a higher life quality for all kinds of Chinese.Last but the most important ,international trade can make a great contribution to the continuing development of China.Based on these three reasons,I do believe that Chinese will decrease misunderstanding to international trade and gradually realize the importance of international trade for...

Words: 977 - Pages: 4

Premium Essay

Economics Development

...Chapter - I Introduction Economic development is one of the main objectives of every society in the world and economic growth is fundamental to economic development (Anwer and Sampath, 2000). There are several economic and non-economic factors affecting economic growth and development. Foreign trade plays an important role in the economic development and growth of a country (Meier, 1980). It serves as an important engine of economic growth and development. Foreign trade as a highway of learning and thus foreign ideas and creativity imported by foreign trade are an impetus to domestic creativity and growth and thus has a deep impact on welfare, stability, and development of an economy. The opening up of trade sometimes works as a sort of industrial revolution in a country whose resources were previously underdeveloped. An outstanding outward-oriented industrialization is superior to inward-oriented industrialization as a policy of economic development, and open economies have generally found to outperform than less open ones (Sachs and Warner, 1995). Industrial development and growth of 1970s and 1980s in some North East and South East Asian economies have also been in line with the lesson that external orientation and foreign trade generate a propelling force for economic development. Trade liberation can lead to significant income increases and effectively promote development by allowing the optional allocation of resources in an economy. Foreign trade is important to the......

Words: 4455 - Pages: 18

Premium Essay

China's New Concept for Development

...CHINA’S NEW CONCEPT FOR DEVELOPMENT Jiyao Bi1 INTRODUCTION In the first 20 years of the 21st century China is entering a new development stage to comprehensively build a prosperous society and to accelerate its modernization drive. China views these two decades as a period of great strategic opportunity which should be pursued vigourously. From an international perspective, peace and development remain the central themes of our era, and China is working to achieve this peaceful environment for development. From a domestic perspective, 25 years of economic reform and opening up have laid a solid basis for development, and China has achieved favourable conditions to accelerate development. However, opportunities are always accompanied by challenges. A key challenge for China is to adopt new thinking and ideas for development and make a new breakthrough in reform, so as to tightly grasp and make a full use of this opportunity to further promote its modernization drive. I. CHINA’S DEVELOPMENT TRENDS AND ISSUES China has experienced rapid economic growth since the late 1970s when economic reform and opening policies was initiated. From 1978 to 2004, China’s GDP grew by a yearly average of 9.5 per cent, the highest levels of GDP growth in the world. China has successfully maintained its sustained and rapid economic growth in recent years by improving and strengthening macro-control policies. Confronted with the external shocks of the Asian financial crisis of 1997–1998 and...

Words: 6087 - Pages: 25

Premium Essay

The Role of Development Finanace in Economic Development in Sub-Saharan Africa

...explore the role of development finance in economic development in Sub-Saharan Africa. Development Finance is practice of using scarce financial resources in an unconventional ways in order to advance economic activity(ies). According to (Nyembezi, 2009), development finance makes the economy run smoothly and effectively. The aim of the development finance is to look at the challenges and design the framework as well as stimulating core activities that will develop the economic growth. As stated by (Nyembezi, 2009) development finance, in an economy, can be compared to oil in a vehicle engine that ensures its sound and smooth operation. According to (Ocran, 2012), development finance is concerned with the financing of development at: • Household level • Firm level • Geographical area/national/regional level This paper looks at the role of development finance at national and regional level in economic development in Sub-Saharan Africa. The Organisation for Economic Co-operation and Development (2002) defines development finance officially as funding “used in measuring the inflow of resources to recipient countries: including (a) bilateral official development assistance (ODA), (b) grants and concessional and non-concessional development lending by multilateral financial institutions, and (c) Other Official Flows for development purposes (including refinancing Loans) which have too low a Grant Element to qualify as ODA”. The role of development finance and economic......

Words: 1598 - Pages: 7

Premium Essay

The Role of Business Economics in National Development

...this introduction on Nigeria’s economic development challenge, this paper reviews business economics, outlining the relationship with innovation and social entrepreneurship. It also presents a holistic framework for economic development covering the individual, firm and macro levels, and outlines the roles of stakeholders at each level, in fostering national development. It concludes by calling on all stakeholders to play their part in leveraging entrepreneurship and all aspects of business economics to unleash the wealth of human capital that Nigeria is endowed with so that more people can participate in the transformation of Nigeria. Nigeria as the most populous country in Africa is naturally endowed with millions and millions of acres of arable land, 38.5 billion barrels of stated oil reserves, vast gas reserves, a variety of unexploited minerals, and a wealth of human capital by virtue of its estimated population of 150 million. It is the world’s eighth largest exporter of oil, and Africa’s second largest economy, after South Africa. Nigeria accounts for 15 per cent of Africa’s population, contributes 11 per cent of Africa’s total output and 16 per cent of its foreign reserves while it accounts for half of the population and more than two-thirds of the output of the West Africa sub-region. It has been at the forefront of the resolution of many political challenges in Africa. Over the last decade, Nigeria has implemented far reaching economic reforms aimed at improving......

Words: 2924 - Pages: 12