Archeologists are actively working to quantitatively measure income and wealth inequality in ancient history based on available data, some of them being quite sophisticated. Timothy A. Kohler and Michael E. Smith’s Ten Thousand Years of Inequality: The Archaeology of Wealth Differences presents existing measurement efforts and insightful discussions of the challenges faced, on all continents except Oceania. These first exercises should help us over time understand better the evolution of inequality in ancient history and its determinants. Understanding better the effects of differences in institutions in the ancient past should be a crucial next step.

This article reviews the memoirs of János Kornai. The famous Hungarian economist describes his life experiences and the concurrent history of Hungary. More importantly, he leads us through his intellectual evolution, explaining how his thinking evolved, how it was influenced by events, how one research question led to another. This brings alive the intellectual and historical developments that led to Kornai's work on socialist incentives, on the theory of planning, on the economics of shortage, and on the transition from socialism to capitalism. The book takes us on a journey that encompasses large elements of the history of economic thought in the second half of the twentieth century, as well as the history of Central Europe.

October 1997, (Forthcoming, American Economic Review) The government's incentives to bail out inefficient projects are determined by the tradeoff between political benefits and economic costs, the latter depending on the decentralization of government. Two effects of federalism are derived: First, fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device (the "competition effect"). Second, monetary centralization, together with fiscal decentralization, induces a conflict of interests and thus may harden budget constraints and reduce inflation (the "checks and balance effect"). Our analysis is used to interpret China's recent experience of transition to a market economy. (JEL E62, E63, H7, L30, P3) Key Words: Soft Budget Constraints, Federalism, Decentralization, Competition, China

We compare the performance of organizational forms (M‐form and U‐form) in experimenting with uncertain projects. In our framework, organizational forms affect the information structure of an organization and thus the way to coordinate changes. Compared to the U‐form, the M‐form organization achieves better coordination in “attribute matching” but suffers from coordination in “attribute compatibility” and less gains in specialization. The distinctive advantage of the M‐form is its flexibility in choosing between small‐scale and full‐scale experimentation.

We argue that a more individualist culture leads to more innovation and to higher growth because of the social status rewards associated with innovation in that culture. We use data on the frequency of particular genes associated with collectivist cultures, as well as a measure of distance in terms of frequencies of blood types, and historic prevalence of pathogens to instrument individualism scores. The relationship between individualism and innovation/growth remains strong even after controlling for institutions and other potentially confounding factors. We also provide evidence consistent with two-way causality between culture and institutions.

We present empirical evidence that, among a variety of cultural dimensions, the individualism-collectivism dimension, based on Hofstede's (2001) data, is the most important and robustly significant effect of culture on long run growth. Other dimensions that have a significant effect, albeit less robust, are generally strongly correlated with individualism and convey similar information. We found no significant or robust effect on growth from cultural dimensions that are independent from the individualism-collectivism cleavage.

The authors present a model of large-scale economic reforms, modeled on the transition process in Eastern Europe, with aggregate and individual uncertainty concerning the outcome of reforms. The government is assumed to choose the speed and sequencing of reforms. The authors compare big-bang strategies with gradualist reform packages. They show that gradualist reform packages may be easier to get started, optimal sequencing of reforms should aim at creating constituencies for further reforms, and gradualism may generate a higher investment response because of a lower option value of waiting than would a big-bang approach.

This article integrates the problem of designing corporate bankruptcy rules into a theory of optimal debt structure. We show that, in an optimal contracting framework with imperfect renegotiation, having multiple creditors increases a firm’s debt capacity while increasing its incentives to default strategically. The optimal debt contract gives creditors claims that are jointly inconsistent in case of default. Bankruptcy rules are therefore a necessary part of the overall financing contract, to make claims consistent and to prevent a value-reducing run for the assets of the firm. We characterize these rules, with predictions about the allocation of security rights, the right to trigger bankruptcy, and the symmetry of treatment of creditors in default.

This paper develops a simple model to analyze the dual‐track approach to market liberalization as a mechanism for implementing efficient Pareto‐improving economic reform, that is, reform achieving efficiency without creating losers. The approach, based on the continued enforcement of the existing plan while simultaneously liberalizing the market, can be understood as a method for making implicit lump‐sum transfers to compensate potential losers of the reform. The model highlights the critical roles of enforcement of the plan for achieving Pareto improvement and full liberalization of the market track for achieving efficiency. We examine how the dual‐track approach has worked in product and labor market liberalization in China.

It has been increasingly recognized that entrepreneurship plays a crucial role in successful economies. The Schumpeterian approach to growth (Aghion and Howitt, 1997) advances the view that entrepreneurial dynamism is the key to innovation and growth. A growing body of policy work emphasizes the important role of entrepreneurs in economic development (World Bank, 2003). Yet, research on entrepreneurship in economics is rather limited. There are three distinct perspectives on entrepreneurship in social sciences. The first perspective focuses on the role of economic, political, and legal institutions in fostering or restricting entrepreneurship. Institutional problems are seen in credit constraints that make it impossible to borrow and set up businesses; insecurity of property rights that provides insufficient incentives for entrepreneurs; and regulatory burdens that make setting up new enterprises difficult. The second perspective focuses on the sociological variables shaping entrepreneurship. For example, sociologists study the role of values and social networks in promoting or discouraging entrepreneurial activities. Social networks may work through a variety of channels, such as family, friends, or ethnic groups. The third perspective emphasizes individual characteristics of entrepreneurs. Psychologists have studied the traits associated with entrepreneurship such as a personal need for achievement, belief in the effect of personal effort on outcomes, attitudes towards risk, and individual self-confidence. Although there are studies on each perspective, little work looks at each of these factors taking the other into account. This is precisely what we do in this paper, using a new data set of Chinese entrepreneurs and a matching sample of non-entrepreneurs with similar age, gender, and educational characteristics. The survey covers both entrepreneurs and non-entrepreneurs in order to understand how they differ in individual characteristics, family background, social networks, values and beliefs, and perceptions of the institutional environment. The data further allow us to separate Chinese entrepreneurs into two groups, by necessity and by opportunity, and to differentiate non-entrepreneurs in three groups, those who never thought to be entrepreneurs, those who thought but never became entrepreneurs, and those who became entrepreneurs but eventually failed. This is a richer data set than a previous survey in Russia.