The Contribution of ICT Investment to Economic Growth and Labor Productivity in Poland 1995-2000

There is large evidence on a positive impact of information and communication technologies (ICT) on economic growth and productivity in a number of developed countries in the 1990’s. There are however no studies, which would estimate the contribution of ICT to growth and productivity in post-communist, transition economies. Data availability, consistency, and trustworthiness have been so far the main obstacles. This paper makes a first attempt, based on an extended growth accounting framework, at estimating the contribution of investment in ICT to output growth and labor productivity in Poland, the largest post-communist economy in Central and Eastern Europe and a prospective member of the EU (2004). The paper discusses the challenges of using available data and its impact on the choice of specific methodologies. The paper shows that ICT investment contributed on average 0.47 of a percentage point or 8.9% of GDP growth and 12.7% or 0.65 of a percentage point contribution to labor productivity between 1995-2000. This relatively large impact of ICT capital is due to an extraordinary acceleration in ICT investments between 1993-2001 induced by – one the one hand – rapidly falling prices of ICT products and services and – on the other hand – large demand for ICT fueled by high economic growth in the 1990’s and substantial pent-up demand due to infrastructural underinvestment in ICT.economic growth, growth accounting, information technology, post-communist countries

Leveraged Buyouts in Poland

The dynamic transformation of the Polish economy from a centrally planned to market economy is by now well advanced. The transformation has also contributed to a rapid development of the capital market. However, the leveraged buyout market has hardly been developed yet. The leveraged buyout technique allows investors to take companies over with little of their own capital. Most of the total value of a transaction is financed with debt, which is secured by assets and cash flow of a company being taken over rather than a buyer. Companies bought through leveraged buyouts (LBOs) substantially increase their return on equity (ROE) thanks to an increase in operating efficiency, higher debt leverage and better allocation of assets. In consequence of the substantial improvements in companies’ performance, LBO transactions can yield extraordinary benefits to both existing shareholders and LBO investors. A case study of a hypothetical leveraged buyout of a Polish public company listed on the Warsaw Stock Exchange highlights the extraordinary returns available to existing shareholders as well as buyout investors. The case study also analyzes the whole process of a leveraged transaction in order to prove its feasibility in the Polish market. Finally, it speculates on the improvements to the company’s performance in the wake of the leveraged buyout. Microeconomic improvements at the leveraged firm level translate into large benefits to the whole economy. On a macroeconomic level, leveraged buyouts contribute to better allocation of capital and higher efficiency of the economy. Leveraged buyouts through replacement of equity capital in post-LBO companies with debt, contribute to freeing scarce equity capital away from declining, low-value added industries into high-risk, high-value added emerging industries, which could not be otherwise financed with debt. Leveraged buyouts can be successfully used in post- socialist countries as a potent tool for acceleration of their economic restructuring. Since efficiency of companies in post-socialist countries as measured by ROE is much lower than in the developed countries, LBOs offer higher benefits to post-socialist countries than to developed countries.leveraged buyouts, postcommunist countries

Does ICT Investment Matter for Growth and Labor Productivity in Transition Economies?

Following up on a previous paper by the same author on the contribution of ICT capital to growth and labor productivity in Poland 1995-2000, this paper extends the study to eight transition economies: Bulgaria, Czech Republic, Hungary, Poland, Russia, Slovakia and Slovenia. The paper shows that the contribution of investment in IT hardware, software and telecommunication equipment to output growth and labor productivity between 1995 and 2000 in most countries featured in the study was much higher than what might be expected on the basis of the level of their GDP per capita. This may suggest that the transition economies – through the use of ICT - are benefiting from the technological leapfrogging to increase the growth rates in output and labor productivity and hence accelerate the process of catching-up. The relatively large contribution of ICT capital to output growth and labor productivity is due to an extraordinary acceleration in real ICT investments, which were growing between 1995 and 2000 at an average rate of more than 20% a year for almost all countries in the study. Large investments in ICT seem to have been induced by (i) falling prices of ICT products and services, which encouraged companies to substitute ICT for non-ICT capital and (ii) an opportunity for higher-than-normal returns on ICT investments due to a large pent-up demand for ICT infrastructure, a legacy of decapitalization and technological gap existing before 1989.economic growth, post-communist countries, information technology, growth accounting

The 'New Economy' and Economic Growth in Transition Economies

post-communist transition, new economy, ICT, economic growth

The Impact of ICT on Growth in Transition Economies

The paper analyzes the multi-channel contribution of Information and Communication Technologies (ICT) to output and labour productivity growth in eight transition economies of Central and Eastern Europe (CEE), i.e. Bulgaria, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia and Slovenia between 1995-2001. The impact of ICT on growth in the new five EU member countries (Czech Republic, Hungary, Poland, Slovakia and Slovenia) was higher than the average for the former EU-15. Hence, ICT - through both the capital deepening and TFP growth in ICT-producing sector - contributed to convergence of the level of income between those countries and the EU-15. This was however not the case for Bulgaria, Romania, and Russia, where ICT contribution to growth was lower than in the EU- 15. ICT thus led to income deconvergence. Future growth prospects of the CEE countries, including Russia, will largely depend on further ICT investments and an ability to ensure their productive use on a macro, industry and micro level. The paper speculates that ICT capital will have a significant contribution to long-term growth in Poland, taken as a proxy for other CEE countries, on the level of 15% of the projected average annual GDP growth of 4% until 2025. This projection does not however take into account the potential for emergence of new applications of ICT, which could stimulate further increases in aggregate productivity. Neither does it measure the possible contribution from TFP growth in ICT sector and from the spillover effects of ICT production and use. The paper argues that the potential of ICT will not however be realized without changes in business models and an increase in the quality of human capital and ICT skills. On the macrolevel, as indicated by the New Economy Indicator, ICT will not benefit CEE countries without them making consistent progress in economic, institutional and regulatory environment.productivity, ICT, Eastern Europe

Assessing EU-10 Banking Sector's Resilience to Credit Losses

The article estimates the likely credit losses in the EU10 countries' banking sector, supposing that economic conditions were to deteriorate further, and that local currencies were depreciated. Factors that may affect the cumulative level of credit losses are discussed. The article concludes that even if the macroeconomic environment were to worsen, credit losses in the EU10 banking sector are likely to be substantial, but remain manageable.EU10, credit losses, banking sector, banking crisis

The Potential of ICT for the Development and Economic Restructuring of the New EU Member States and Candidate Countries

ICT could help the New Member States catch up with EU-15 in economic terms. The report documents the potential of ICT for improved productivity performance in the Central and Eastern Europe countries (CEE) at the macro and industry level, in relation to the EU-15 and the US.productivity, information and communication technologies, convergence, Eastern Europe

ICT and Productivity Growth in Transition Economies: Two-Phase Convergence and Structural Reforms

This paper investigates the role of information and communication technology (ICT) as a driver of improved productivity performance of Central and Eastern European (CEE) countries and Russia (CEER) relative to the EU-15 and the U.S. during the 1990s. The paper investigates how, and to what extent, ICT contributed to a narrowing in the productivity gap. Although investment in ICT capital has strongly increased, total factor productivity (TFP) growth has made the largest contribution to convergence during the 1990s. In a few CEER countries, notably the Czech Republic and Hungary, ICT production contributed more to productivity growth than the EU-15 average. Spillovers from a productive use of ICT in both CEER countries and the EU-15 are still considerably lower than in the U.S.. The paper argues that the convergence process between CEER countries and the EU-15 is characterized by two phases. In the first “restructuring” phase, convergence has been driven by enterprise restructuring in manufacturing, which was facilitated by rapid ICT investment in new plants, and by growth in ICT production in particular through FDI. In the second “expansionary” phase the sustained convergence has to rely more on productivity growth in sectors that make intensive use of ICT, in particular the service sector. While the first phase is dependent largely on openness and basic fundamental reforms, the second phase requires deeper structural reforms focused on product and labor market flexibility, business re-organization and investment in human capital and ICT skills.productivity, economic growth, convergence, ICT, Eastern Europe

Indexing the Bijective BWT

The Burrows-Wheeler transform (BWT) is a permutation whose applications are prevalent in data compression and text indexing. The bijective BWT is a bijective variant of it that has not yet been studied for text indexing applications. We fill this gap by proposing a self-index built on the bijective BWT . The self-index applies the backward search technique of the FM-index to find a pattern P with O(|P| lg|P|) backward search steps