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Socialist economic growth and political investment cycles, Volume 1
Author:Zou, Heng-fu; Country:Europe and Central Asia; China;
Date Stored:2001/04/26Document Date:1991/03/31
Document Type:Policy Research Working PaperSubTopics:Environmental Economics & Policies; International Terrorism & Counterterrorism; Economic Theory & Research; Trade and Regional Integration; Financial Intermediation
Language:EnglishMajor Sector:(Historic)Economic Policy
Region:Europe and Central Asia; East Asia and PacificReport Number:WPS615
Sub Sectors:Macro/Non-TradeCollection Title:Policy, Research, and External Affairs working papers ; no. WPS 615. Public economics
Volume No:1  

Summary: Socialist economic growth in China and Eastern Europe has long been characterized by investment hunger, drives toward expansion, and cyclical fluctuation of investment rates. For decades, relatively high growth rates - often accompanied by a shortage of consumption goods - have typically been achieved at the consumers' expense. Treating social planners as self-interested bureaucrats, the author offers a positive model to help understand the norms of socialist economic growth. This model demonstrates: (a) how rapid capital accumulation tends to serve the social planners' own interests; (b) why investment hunger is an inevitable consequence of social planners' rational choices; and (c) when a drive toward expansion can cause a permanent shortage of consumption goods. Through numerical examples and empirical tests, the author provides a framework within which to analyze political investment cycles in a socialist economy. In China, he finds that high investment rates have often been linked to leftist political regimes and low or moderate investment rates with rightist political regimes.

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