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Germany, Italy, and Russia
Comparative economyMa, Lin & Xu, Hanqing
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
Backgrounds of Germany, Italy, & Russia Germany:Area: 357,114 sq. kmPopulation : 82,329,758.Government: Federal republic Italy: Area: 301,225 sq. kmPopulation : 60.3 millionGovernment: Republic since June 2, 1946 Russia: Area: 17 million sq. kmPopulation : 139.4 millionGovernment: Federation
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
2nd Criterion: Forms of ownership of land and capitalGermany: Resources are owned by private individuals or group of individualsStrong business & investment freedom indexEncourage investment of foreign investors
Italy:Resources are owned by private individuals or group of individualsNorthern part: developed industrial, dominated by private
companiesSouth 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’t has built a lot nontransparent regulations inefficiency
3rd Criterion: Role of planningGermany:
Market economy--- avoid central planningThe largest trade country in European Union and in
the top 5 in the world.Italy:Planned market economy government does have
much control over what can be tradedRussia: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.
4th Criterion: Types of IncentivesGermany:Material: High wage rate of labor. And highly
skilled workers improve production.Social welfare (health care, pensions)Italy:Material: government funded business
assistancesupport the small firm nexusesR & D spendingincrease to encourage
innovationRussia:Material: attach important to tax incentive
5th Criterion: Income RedistributionGermany:Tax system to limit gap between poor and richIndividual’s income tax is progressivehigh 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
6th Criterion: Role of politicsGermany:
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.
Evaluating the Economies Based Upon the 9 Criterions
Level of output
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
GDP per capital
ItalyGermanyRussia
U.S
. $
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
GDP growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-10.00
-5.00
0.00
5.00
10.00
15.00
GDP per capital growth
ItalyGermanyRussia
Annual gro
wth
(%
)
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
Composition of Output
Country
(percentage)
Agriculture
(1999-2008)
Military
(1999-2008)
Health
(1997-2006)
Imports
(1999-2008)
Exports
(1999-2008)
Italy 2.449095 1.919059 8.27 26.10095 26.57778
Germany 1.05793 1.396353 10.45 34.68825 38.80025
Russia 5.713896 3.796362 5.82 23.10177 35.89977
Degree of Static Efficiency
1999 2000 2001 2002 2003 2004 2005 2006 2007 20085.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
Unemploymenat Rate (%)
ItalyGermanyRussia
Italy & Russia: the unemployment rate were declining from 1999 to 2007.
Germany: the unemployment rates was fickle during these ten years.
Degree of Static Efficiency
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201140
45
50
55
60
65
70
75
Economic Freedom Index (100=Free)
ItalyGermanyRussia
CurrentlyItaly: 60.3Germany: 71.8Russia: 50.5
Degree of Dynamic Efficiency
GDP growth-all three countries have similar GDP growthUnemployment-Italy and Russia have had the lowest
unemployment rates - Germany has fickle unemployment ratesWastefulness 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
Ranking (highest to least)-Germany-Italy-Russia
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
inflation rate-Russia had an extremely unstable
inflation rate, especially in 1999, which reached 72.39%.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-10
0
10
20
30
40
50
60
70
80
Inflation Rate (GDP deflator)
ItalyGermanyRussia
exchange rate volatility-Ruble has been relatively stable
against the dollar.Country
(against
dollars)
2004 2005 2006 2007 2008 2009 2010 2011
Italy
(Euro)
1.26 1.35 1.20 1.32 1.46 1.39 1.44 1.33
Germany
(Euro)
1.26 1.35 1.20 1.32 1.46 1.39 1.44 1.33
Russia
(Ruble)
0.033 0.033 0.033 0.034 0.034 0.034 0.033 0.033
labor force participation rate-Italy had the lowest labor force
participation rate which was around 48%.
2000 2001 2002 2003 2004 2005 2006 2007 200840.00
45.00
50.00
55.00
60.00
65.00
LFPR (% of pop. ages 15+)
ItalyGermanyRussia
Rankings (highest to least)-Germany-Russia-Italy
Economic Security of the Individual
Income per person
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
5000
10000
15000
20000
25000
30000
35000
Income per person (GDP/per capita, inflation adjusted)
ItalyGermanyRussia
U.S
.$
income growth per person
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-4
-2
0
2
4
6
8
10
12
Income growth per person
ItalyGermanyRussia
Perc
enta
ge C
hange
life expectancy in years
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200960
65
70
75
80
85
Life Expectancy in years
ItalyGermanyRussia
infant mortality rate
1999 2000 2001 2002 2003 2004 2005 2006 2007 20080.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
Infant Mortality Rate (deaths per 1,000 live births)
RussiaGermanyItaly
Ranks (highest to least)-Italy-Germany-Russia
Degree of Income or Wealth Equality
Gini coefficients-Germany: 28.3-Italy: 36-Russia: 43.7Rankings (highest to least)-Germany-Italy-Russia
Degree of Economic Freedom
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201140
45
50
55
60
65
70
75
Economic Freedom Index (100=Free)
ItalyGermanyRussia
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
Conclusion & Policy recommendation
Germany-GDP, income level, economic
freedom are the best in the three countries.
But,-unemployment is higher than
other two countries.
Suggestions-resist the minimum wages-keep the past policies, and combine
with the current fiscal policies to a stable growth in GDP.
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
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)
Italy-relatively common
But, -labor market is the worst-unemployment rate is high
Suggestions-make rules to hire more employees-regulation -tax cuts to low the labor costs
Thanks!
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