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Germany, Italy, and Russia

Germany, Italy, and Russia. Comparative economy Ma, Lin & Xu , Hanqing. What will be covered?. 6 institutional frameworks of three countries

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Germany, Italy, and Russia

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  1. Germany, Italy, and Russia

    Comparative economy Ma, Lin & Xu, Hanqing
  2. What will be covered? 6 institutional frameworks of three countries Allocation Mechanism, Forms of Ownership of Land and Capital, Role of Planning, Types of Incentives, Income Redistribution, Role of Politics 9 criterions economic analyze of three countries Conclusion & Policy recommendation
  3. Backgrounds of Germany, Italy, & Russia Germany: Area: 357,114 sq. km Population : 82,329,758. Government: Federal republic Italy: Area: 301,225 sq. km Population : 60.3 million Government: Republic since June 2, 1946 Russia: Area: 17 million sq. km Population : 139.4 million Government: Federation
  4. 1st Criterion: Allocation Mechanism Germany: “Social Market” Historical experience to choose “market” after Nazi & EU member. Command: Redistributing gap between wealth and poor people— “social”. West German  Capitalist East German  Influenced by Russia of socialism Italy: Pure Market Categorized as a country with high freedom for business, investment and trade Moderate command economy Agriculturally based economy the world's fifth-largest industrial economy (after WWII) Russia: Partial Free Market Has being transitioned from command economy Command + Market : Socialism & Capitalism Many state-owned enterprises that have been privatized
  5. 2nd Criterion: Forms of ownership of land and capital Germany: Resources are owned by private individuals or group of individuals Strong business &investment freedom index Encourage investment of foreign investors Italy: Resources are owned by private individuals or group of individuals Northern part: developed industrial, dominated by private companies South part: less developed, welfare dependent, and mostly agricultural Russia: The freedom of property right of Russia is still too low  only 25 (2011 Index) Govn’thas built a lot nontransparent regulations  inefficiency
  6. 3rd Criterion: Role of planning Germany: Market economy--- avoid central planning The largest trade country in European Union and in the top 5 in the world. Italy: Planned market economy  government does havemuch control over what can be traded Russia: Transform from state planning to the “market based economic” Primary production of raw material, government gradually give hands off the controls of export and import.
  7. 4th Criterion: Types of Incentives Germany: Material: High wage rate of labor. And highly skilled workers improve production. Social welfare (health care, pensions) Italy: Material: government funded business assistancesupport the small firm nexuses R & D spendingincrease to encourage innovation Russia: Material: attach important to tax incentive
  8. 5th Criterion: Income Redistribution Germany: Tax system to limit gap between poor and rich Individual’s income tax is progressive high income tax rate with the range of income tax from 15.8% to 47.5% in 2010 Italy: less redistribution and risk sharing through its welfare and tax system different structures Russia: comparatively low individual income tax, while Russia has many state-owned enterprises  role of suppliers of welfare services
  9. 6th Criterion: Role of politics Germany: business and Investment freedom are strong  the world’s most powerful and dynamic economy. (support industries) member in EU’s Common Agricultural Policy  subsidizes, and distorts the prices of agriculture Italy: Economic freedom is low (labor freedom, property rights), but Business, investment, and trade freedom very high which are 77.3/64.3 avg. 75/50.2 avg. 87.6/74.8 avg. Items subject to price controls at the national level include drinking water, electricity, gas, highway tolls Common Agriculture Policy Russia: Only transitioned about half size of former Soviet economy, and has operated nearly 60 years based on central planning  rely on state control.
  10. Evaluating the Economies Based Upon the 9 Criterions

  11. Level of output

  12. Germany & Italy: growth slowed down in terms of the risk of recession in 2008. Russia: economy of Russia has not been as seriously affected by the global financial crisis
  13. GDP growth
  14. Russia: significant annual growth from 2000 to 2007 Germany & Italy: the annual GDP growth of Italy was higher than Germany from 2000 to 2002. After that, the annual GDP growth of Germany was higher than Italy. All of them reached negative in 2009
  15. Composition of Output
  16. Degree of Static Efficiency
  17. Italy & Russia: the unemployment rate were declining from 1999 to 2007. Germany: the unemployment rates was fickle during these ten years.
  18. Degree of Static Efficiency
  19. Currently Italy: 60.3 Germany: 71.8 Russia: 50.5
  20. Degree of Dynamic Efficiency GDP growth -all three countries have similar GDP growth Unemployment -Italy and Russia have had the lowest unemployment rates - Germany has fickle unemployment rates Wastefulness in economy -Germany: strong Deutsche Mark before -Italy: high costs of the welfare system, widespread corruption -Russia: lack of industry associations, powerful lobby and certification authorities
  21. Ranking (highest to least) -Germany -Italy -Russia
  22. Macroeconomic Stability GDP per capita -From 2000 to 2008, Germany had the highest GDP per capital and highest GDP per capital growth. -Russia had a bad performance over time Unemployment -Germany had the weakest stability because of the volatile unemployment rate
  23. inflation rate -Russia had an extremely unstable inflation rate, especially in 1999, which reached 72.39%.
  24. exchange rate volatility -Ruble has been relatively stable against the dollar.
  25. labor force participation rate -Italy had the lowest labor force participation rate which was around 48%.
  26. Rankings (highest to least) -Germany -Russia -Italy
  27. Economic Security of the Individual Income per person
  28. income growth per person
  29. life expectancy in years
  30. infant mortality rate
  31. Ranks (highest to least) -Italy -Germany -Russia
  32. Degree of Income or Wealth Equality Gini coefficients -Germany: 28.3 -Italy: 36 -Russia: 43.7 Rankings (highest to least) -Germany -Italy -Russia
  33. Degree of Economic Freedom
  34. Germany: gradual increase in economic freedom. Russia: lowest in the three countries. (corruption and limited respect for property rights hinder the development of economic activity that is free from government control or influence.) Ranking (highest to least) -Germany -Italy -Russia
  35. Conclusion & Policy recommendation Germany -GDP, income level, economic freedom are the best in the three countries. But, -unemployment is higher than other two countries.
  36. Suggestions -resist the minimum wages -keep the past policies, and combine with the current fiscal policies to a stable growth in GDP.
  37. Russia -growth of GDP is the highest in the three countries But, -economic freedom is low -depend heavily on the revenue of these natural resources
  38. Suggestions -increase the transparency (state owned enterprises share the most parts in market, so the regulations are important and necessry) -improve the industries (beyond the natural resources)
  39. Italy -relatively common But, -labor market is the worst -unemployment rate is high
  40. Suggestions -make rules to hire more employees -regulation -tax cuts to low the labor costs
  41. Thanks!
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