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American Economic Association

African Economies in Transition: Volume 1, The Changing Role of the State by Jo Ann Paulson; African Economies in Transition: Volume 2, The Reform Experience by Jo Ann Paulson Review by: Margaret S. McMillan Journal of Economic Literature, Vol. 39, No. 2 (Jun., 2001), pp. 610-612 Published by: American Economic Association Stable URL: . Accessed: 16/08/2012 09:35
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Journal of Economic Literature, Vol. XXXIX (June 2001)

and Kerry Max in "The Labour Market and Female Schooling?" find that the paucity of female education in Africa is not wellexplained by lower Mincerian returns. Minquan Liu on "Labour Allocation under Baochan" argues that a traditional Chinese collective farming system can overcome the problem of shirkingin the provisionof labor for collective activities. The elaborate theoretical structure did not convince this reader that serious problems do not remain, especially when quality of work, as well as raw output, are important. Partha Dasgupta in "Nutritional Status and Poverty Traps" returns to a theme which he has elaborated on with Devraj Ray. If the long-run relation between food intake and the market value of work delivered is nonconcave, it may prove impossible for the poor and unhealthy to break through the barrier which excludes them from the labor market. Such cases, as Mirrlees noted long ago, can even make equality inefficient. And inequality can emerge between individuals who are initially identical. Were Luca d'Agliano alive today, he would find some important answers to his questions in this volume. But he would also find more questions to feed his great appetite for questioning research and speculation. The benefits which he cannot enjoy are provided to the profession in this short but densely-packed volume.

papers of which make up this volume. Few graduate students would even be considered for such honorific treatment; but Luca d'Agliano was seen as truly exceptional by all who encountered him. The book is a shining exception to the rule that honorific volumes assemble bottom-drawer papers. The quality, while not universallysuperb, is generally high. And the best of the contributions will be major references for the field of development studies for years to come. All the papers address issues of labor, in one or another aspect, which was the area of Luca's sadly terminated research. Thus each of the three papers in section 1, entitled "Growth, Trade and Employment," the only section not to include labor in its title, is concerned with one or another aspect of labor markets. Enzo Grilli and Giovanni Zanalda in "Growth and Employment: Where do we stand?"reviews the evidence which shows that the elasticity of employment with respect to counoutput,which is generallylow in industrial tries, is often far higher in developing countries, as it was in the past in industrial countries. The reasons for this important observation are judiciously examined. Edmund V. K. Fitzgerald and Giorgio Perosino in "Trade Liberalization: A Critical Approach" offer an important survey of what one might call post-Heckscher-Ohlin analysis of the effects of opening countriesto freer trade.A wide range of literatureis reviewed, embracingboth new micro models and macroeconomic approaches. Francesco Daveri and RiccardoFaini in "Riskand Migration"refine and extend the Harris-Todaro Model and apply their model to regional migrationwithin Italy. Gustav Ranis and Frances Stewart in "VGoods and the Urban Informal Sector" combine theory and detailed empirical analysis of a much-neglected area: the informal sector. Because urban factor markets are strongly activities segmented, high- and low-productivity can co-exist. Under this general umbrella, the authors identify a successful case (Thailand) and an unsuccessful one (Philippines). Giorgio Barba Navaretti examines "Segmented Labour Markets in Sub-Sahara Africa" using theory and empirical analysis of 350 enterprises in Ghana and Kenya. Simon Appleton, John Hoddinott, Pramila Krishnan,

African Economies in Transition. By Jo Ann Paulson. Volume 1, The Changing Role of the State. Volume 2, The Reform Experience. Studies on the African Economies. New York: St. Martin's Press, 1999. Pp. ix, 342. ISBN 0-312JEL 2000-0287 and 2000-0288 17751-8. What kinds of reforms have (socialist) African countries implemented in an attempt to move away from state-led development strategies? And, are there any lessons we can learn from these experiences that will help to ease the transition in other countries? This collection of essays is devoted to these issues and is likely to leave the thoughtful reader with more questions than answers. This is not necessarily the fault of the authors. Rather it

Book Reviews
is a testament to how little documented information is available on this topic, even in Africa. In this respect, the volume is a useful contribution to the literature on African political and economic development. Like many studies of this kind, the work suffers from an ideological bias. This is not surprising as the study was commissioned by the World Bank and written mostly by World Bank economists with, it appears, little input from Africans. Although the quality of the essays is variable, for the most part, there is still an underlying acceptance of the World Bank "party line" that runs throughout much of the work. For example, Tommasi states, without any supporting evidence, "Opening the economy [of Madagascar] to outside investors is essential, not only because of the shortage of capital but, more importantly, because it would instill new dynamism" (volume 2, p. 111). Not all of the essays suffer equally from this problem. For example, regarding privatization, Adam notes that, at present, foreign investors are likely to have superior bargaining power vis-a-vis African regulatory institutions. Thus, although he does not explicitly say it, he implies that opening the economy to foreign investors might not be welfare enhancing. The book is in two volumes. Volume 1 contains seven chapters and is divided into two parts. Part 1 focuses on macroeconomic policy and performance and investment. Part 2 focuses on the questions of privatization and public enterprise reform. Volume 2 contains six chapters, also divided into two parts. Part 1 contains four case studies of Angola and Mozambique, Madagascar, Tanzania, and treated separately. Part 2 Mozambique considers the role of agriculture. Chapter 1 of volume 1 by the editors, Jo Ann Paulson, and Michael Gavin, provides an objective and useful overview of the political and economic context of the reform programs in Angola, Benin, Congo, Ethiopia, Guinea, Madagascar, Mozambique, Somalia, and Tanzania. It is in this chapter that we learn that the emphasis of the study is primarily on countries that declared themselves Marxist in the late 1960s or early 1970s and therefore started economic liberalization with a 15-20 year legacy of state domination of the econ-


omy. However, what differentiates these countries from others in Africa becomes less and less clear as the reader learns of the experiences of other African countries. Particularly refreshing is the chapter by Edgardo Barandiaranon the role of government in Africa. Barandiaran makes no pretense at having answers to Africa's problems. Rather, he argues that at this time, we cannot adequately assess the progress of government reforms in Africa because we just don't have sufficient information. Instead, the chapter raises a number of interesting questions including: What functions should government perform? What role should government play in resource distribution? How should government raise revenue? And, how should government manage the revenue it does have so as to maximize social welfare? The author does not provide answers to these questions but rather provides a frameworkin which to think about them. He then goes on to argue that because the political systems in these countries have not as yet changed, governments continue to serve the interests of a few key but small constituencies (including foreign donors). Finally, the author argues that the pace of economic reform will continue to be slow without political reform. The case study of Angola and Mozambique by Pereira da Silva and Solimano examines two countries attempting reforms in the midst of civil war. As we know from recent work by Paul Collier and Anke Hoeffler, civil war affects most of the world's poorest countries. For this reason, I find this case study particularly compelling. The authors argue that trying to design economic policy without regard to the political situation in these countries is hypocritical and doomed to failure. They even go so far as to argue that in countries experiencing civil war, existing networks supporting the old political economy must be dismantled. While this might be true, it is not obvious that economics has anything to offer on this count. Finally, they argue that the situation in these countries is not conducive to private investment and hence any recovery must be led by public sector investment. Both chapters on agriculture are somewhat disappointing. Although very different in


Journal of Economic Literature, Vol. XXXIX (June 2001)

leaf through the appendix of the book to discover who actually constitutes the Assembly: corporate vice-presidents, big-name professors, think-tank presidents, editors, lawyers. The Assembly was founded in 1950, a time when people believed that such chablis-andgouda conclaves could and should identify the real problems the country faces. Unfortunately, while the Assembly has been working hard through the years to define our real problems for us, nobody seems to have been listening: "These three long-term issues . . . have been apparent to serious policy analysts for at least two decades. Yet year after year, America has only waved its hands at these problems . . ." (p. 10). No wonder the Assembly is becoming radical. In this volume, -the Assembly asks the three authors Penner, Sawhill, and Taylor to make the case for the problems it has selected for priority thinking. They do so very persuasively and with a great deal of breadth and understanding. After an initial chapter laying out the radically middle agenda, the authors carefully review the recent performance of the U.S. economy in chapter 2, and then describe in chapters 3, 4, and 5 the three main problems of productivity, inequality of opportunity, and retirement. The analysis is cogent and largely consistent with the existing literature. In the end, the three problems all involve raising income. Productivity is a problem because without productivity growth, our standard of living may fall behind that of other peoples, like the Japanese and the Germans (pp. 21, 81, 85). Inequality of opportunity is important because life is like a footrace for money, and everyone should run hard but start at the same line (pp. 103, 163). Retirement finance is important because you can't expect children to take care of their parents for a long time (p. 123). In fact, things would generally be better if people would just work more (pp. 79, 89, 103, 138, and elsewhere). The policy proposals are not new, but that is not the point of a radically middle agenda (p. 17): the radical part is not the ideas, it is the intensity with which the Assembly believes in the reasonableness of the ideas. Are these ideas reasonable? To assess the book completely, the reader needs to arrogate

their approaches, the authors both document extensively the lack of progress in the agricultural sector in Africa. Jones suggests that part of the failure to improve agricultural performance is due to the slow implementation of incentive measures while Barrett and Carter argue that the current reforms ignore important microeconomic linkages. These essays leave the reader wondering why it is that governments can't figure out the things about reform that these authors apparently understand. In spite of its shortcomings, there is much to be learned from the book. We need more books of this sort with more input from Africans if we are to truly understand what is going on in Africa.

Updating America's Social Contract: Economic Growth and Opportunity in the New Century. By Rudolph G. Penner, Isabel V. Sawhill, and Timothy Taylor. New York, London: W. W. Norton, 2000. The 95th American Assembly came together in June 1999 to discuss the various problems facing the economy of the new millennium and, in this volume, announces that three are particularly pressing. First, the "new economy" of globalized trade and rapid technological innovation may not be raising productivity as much as one might wish. Second, standards of living are becoming less equal, and the poor are not advancing as rapidly as the rich. Third, someone will have to pay to maintain the standard of living of the baby boomers when they retire. The Assembly also makes a series of reasonable recommendations about these problems: encourage savings for productivity growth, increase the returns to work at the low end of the wage distribution, and combine tax/benefit changes with longer working times to pay for baby-boomer pensions. The Assembly calls this an agenda of the "radical middle" - a program so reasonable that it deserves the same kind of zealous backing that radical Left and Right agendas receive. The Assembly views itself as a prudent assessor of the country's problems, a faith that becomes understandable when you