The transition from communism : a diagrammatic exposition of obstacles to the demand for the rule of law, Vol. 1 of 1

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Author Profile > Report Details

The transition from communism : a diagrammatic exposition of obstacles to the demand for the rule of law

Author:	Hoff, Karla; Stiglitz, Joseph E.;	Collection Title:	Policy, Research working paper series ; no. WPS 3352
Country:	World;	Date Stored:	2004/08/02
Document Date:	2004/06/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS3352	SubTopics:	Environmental Economics & Policies; Public Sector Corruption & Anticorruption Measures; Economic Theory & Research; Corruption & Anticorruption Law; Legal Products; Labor Policies
Volume No:	1 of 1

Summary: In an earlier paper, the authors presented a mathematical exposition of a theory that demonstrated that mass privatization without institutions to limit asset-stripping may not lead to a demand for the rule of law ["After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review 94(3), June 2004, pages 753-63]. This report makes the same argument in terms of simple diagrams. The central idea is that economic actions (to build value or strip assets) and political positions of individuals are interdependent. "Big bang" privatization may give individuals an interest in taking what they can quickly, rather than waiting for the establishment of property rights protection that would permit them to build more valuable assets. Asset stripping gives some of these individuals an interest in prolonging the absence of the rule of law so that they can enjoy the fruits of stripping without the constraint of government enforcement of property rights. Each individual, in attempting to influence society's choice of the environment, focuses on the impact on himself, not the impact on others. In choosing their economic actions, individuals ignore the effect of their economic decisions on how they themselves vote, how other people believe the system will evolve, and thus how others invest and vote. Thus, two distortions of individual behavior are associated with the public good nature of votes. The authors use this framework to make one further point. Because of the interdependence between individuals' economic and political choices, demand for and opposition to the rule of law cannot be separated from macroeconomic policy. A too stringent macroeconomic policy can lower the returns to building value relative to stripping assets and thereby weaken the equilibrium demand for the rule of law. Macroeconomic policies and institutional evolution are not independent issues.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 23 pages	Official version*	0.12
	Text	Text version**


Light-Weight Documents Lighter (less MB) documents which may or may not be the final, official version
File Type		Description	File Size (mb)

	PDF 23 pages	WPS3352	0.12

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/6XC7R2P2U0