Stodder: Financial Transition, July Stodder: Financial Transition, July 1 Finance in Transitional and Finance in Transitional and Developing Economies Developing Economies : China and : China and Others Others Topics: Topics: Growth and Inequality in a Growth and Inequality in a ‘Dualistic’ Economy ‘Dualistic’ Economy Property Rights and Distribution Property Rights and Distribution Financial Financial Depth Depth vs. vs. Breadth Breadth
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Finance in Transitional and Developing Economies : China and Others
Finance in Transitional and Developing Economies : China and Others. Topics: Growth and Inequality in a ‘Dualistic’ Economy Property Rights and Distribution Financial Depth vs. Breadth. Surplus Labor in Agriculture: Marginal Product approaches 0. Consumption. investment. Agricultural - PowerPoint PPT Presentation
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Stodder: Financial Transition, JulyStodder: Financial Transition, July 11
Finance in Transitional and Developing Finance in Transitional and Developing EconomiesEconomies: China and Others: China and Others
Topics:Topics:
Growth and Inequality in a ‘Dualistic’ Growth and Inequality in a ‘Dualistic’ EconomyEconomy
Property Rights and DistributionProperty Rights and Distribution
Financial Financial DepthDepth vs. vs. BreadthBreadth
Stodder: Financial Transition, JulyStodder: Financial Transition, July 22
Surplus Labor in Agriculture: Surplus Labor in Agriculture: Marginal Product approaches 0Marginal Product approaches 0
Total Product of Labor in Agric.
0V = Labor in Agriculture
Agricultural Labor Surplus
Marginal Product of Labor -> 0
Stodder: Financial Transition, JulyStodder: Financial Transition, July 33
Stodder: Financial Transition, JulyStodder: Financial Transition, July 44
Surplus Labor, Dualistic Economy Surplus Labor, Dualistic Economy Nobel PrizeNobel Prize Winning Model Winning Model
Developed byDeveloped by Arthur Lewis (St. Lucia)Arthur Lewis (St. Lucia) Gustav Ranis (Germany)Gustav Ranis (Germany) John Fei (Taiwan)John Fei (Taiwan)
Growth with Equity: The Taiwan Case
(Oxford University Press, 1979)
-John C. H. Fei, Gustav Ranis, Shirley W. Y. Kuo
Stodder: Financial Transition, JulyStodder: Financial Transition, July 55
ImplicationsImplications of Two-Sector Model: of Two-Sector Model:
Agricultural and Industrial Wages Agricultural and Industrial Wages Linked, kept flat by Surplus Labor.Linked, kept flat by Surplus Labor.
Wages can only rise strongly when Wages can only rise strongly when Labor Surplus is used up.Labor Surplus is used up.
Non-Agricultural Profits grow much Non-Agricultural Profits grow much faster than Wages.faster than Wages.
Stodder: Financial Transition, JulyStodder: Financial Transition, July 66
Tied Wages, JapanTied Wages, Japan
Stodder: Financial Transition, JulyStodder: Financial Transition, July 77
Tied Wages, TaiwanTied Wages, Taiwan
Stodder: Financial Transition, JulyStodder: Financial Transition, July 88
Stodder: Financial Transition, JulyStodder: Financial Transition, July 99
Property Rights & DistributionProperty Rights & Distribution East Asian Development successes linked with East Asian Development successes linked with
new new broadly distributedbroadly distributed forms of property rights. forms of property rights. (South Korea, Taiwan, China, Vietnam)(South Korea, Taiwan, China, Vietnam)
These property rights land reforms achieve: These property rights land reforms achieve: • Better matching of labor with land resources, Better matching of labor with land resources, • Incentives for long term investment,Incentives for long term investment,• More liquidity in the market for agricultural property.More liquidity in the market for agricultural property.
Broader Distribution of Broader Distribution of Financial AssetsFinancial Assets is more is more complex, but may have even greater long term complex, but may have even greater long term benefits for productivity and growth. benefits for productivity and growth.
Stodder: Financial Transition, JulyStodder: Financial Transition, July 1010
CountryGrowth 2000-05 Gini Coef.
China 9.6 44.0
Cambodia 8.9 40.0
Vietnam 7.5 36.1
Laos 6.2 37.0
Ukraine 8.0 31.0
Lithuania 7.8 32.5
Estonia 7.5 33.0
Belarus 7.5 30.4
Russia 6.2 40.5
Romania 5.8 28.8
Bulgaria 5.0 31.6
Slovakia 4.9 25.8
Hungary 4.1 26.9
Czech Rep. 3.5 27.3
Poland 3.2 34.1
East-Asian: Growth and Equality Inversely Correlated
TWO TRANSITIONS onINCOME DISTRIBUTION
East-European: No Clear Pattern
Stodder: Financial Transition, JulyStodder: Financial Transition, July 1111
‘‘Oligarch’ Loans-for-Shares, RussiaOligarch’ Loans-for-Shares, Russia
Stodder: Financial Transition, JulyStodder: Financial Transition, July 1212
China’s Financial System:China’s Financial System:Deep but not BroadDeep but not Broad
We will see that Financial Assets in We will see that Financial Assets in China:China:
Have unusual Have unusual depthdepth, forming an , forming an unusually unusually high portion of GDPhigh portion of GDP, but, but
Lack the Lack the breadthbreadth associated with associated with other Rapidly Developing Economies, other Rapidly Developing Economies, since they are since they are narrowly confined to narrowly confined to the Banking Sectorthe Banking Sector..
Stodder: Financial Transition, JulyStodder: Financial Transition, July 1313
Financial ‘Deepening’ Correlates with Financial ‘Deepening’ Correlates with Higher GDP per capitaHigher GDP per capita
Stodder: Financial Transition, JulyStodder: Financial Transition, July 2020
If Household Saving is ‘Bottled-up’ in Banks, If Household Saving is ‘Bottled-up’ in Banks, May Pressure Excess Stock SpeculationMay Pressure Excess Stock Speculation
HangSeng
FTSEDJIA
ATXBovespa
SSE
4.5% 4.8% 5.2%
8.4%
11.5%
14.4%
0.5%0.5%
0.4% 0.9% 1.1%1.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
AbsAvChAnnual Max-Min
Stodder: Financial Transition, JulyStodder: Financial Transition, July 2121
Bank Dependency may also Bank Dependency may also Weaken Response to Currency Crisis Weaken Response to Currency Crisis