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By Mv P, Olivier Blanchard and Andrei ShleiferS Olivier Blanchard and Andrei Shleifer

Abstract

In China, local governments have actively contributed to the growth of new firms. In Russia, local governments have typically stood in the way, be it through taxation, regulation, or corruption. We argue that the difference can be traced to lies in the degree of political centralization present in China, but not in Russia. In China the central government has been strong and disciplined enough to induce local governments to favor growth. In Russia, it has not. We agree, but with an important caveat. We believe the experience of Russia indicates that another ingredient is crucial, namely political centralization. [JEL P30, P50] Over the past decade, China’s GDP has grown at one of the highest rates in the world, Russia’s at one of the lowest. The difference has come mostly from the growth of the new private sector. In China, the new private sector has thrived. In Russia, it has stagnated. Why this sharp divergence between private sector evolutions? In both countries, the evidence points to the importance of the behavior of local governments. In China, local governments have actively contributed to the growth of new firm

Topics: LY, i
Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.197.6153
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