Making sense of the J-curve: Capital utilisation, output, and total factor productivity in Polish industry 1990 - 1993

The economies of Central and Eastern Europe are undergoing a period of rapid structural change. The general pattern confirms to the J-curve anticipated by several observers at the start of transition. This paper conceptualises the J-curve as the result of a combination of two factors. First, real energy price increases render parts of the capital stock obsolete, due to complementarity between capital and energy in the short run. Second, demand shifts and to a lesser extent efficiency improvements induced by increases in competition cause dramatic changes in total factor productivity. The paper shows for the case of Polish industry that 43 per cent of the capital stock was rendered obsolete over the 1990-1993 period. Total factor productivity fell by 11 per cent in 1990 but had increased to 17 per cent above the 1989 level by 1993. As the capital stock is gradually rebuilt, improvements in efficiency will guarantee an output level higher than before the start of transition.capital ultilisation,efficiency,J-curve,Poland

Labour markets in Poland and Hungary five years from the start of transition: Evidence from monthly data

This paper presents error correction estimates of a simple interdependent model of the labour market using monthly data over 1990-1994 for the industrial sector in Poland and Hungary. The aim is to investigate three issues in the performance of labour markets during transition. First, is there a stable labour market equilibrium or do high unemployment rates across the region indicate hysteresis? Second, has the intensity of employment adjustment increased with progress in institutional reforms that strengthened corporate governance at the enterprise level? Third, what governs the evolution of real wages and to what extent is there evidence for strong insider power in the labour market? The results reveal striking differences between Poland and Hungary. The former exhibits hysteresis and evidence for considerable insider power while the latter has experienced adjustment towards a stable labour market equilibrium. The intensity of adjustment, however, is high in both countries over the sample period and fails to respond to the initiation of institutional reforms.Hysteresis,Adjustment Intensity,Insider Power

TRUST IN TRANSITION: CROSS COUNTRY AND FIRM EVIDENCE

This paper uses data from a large survey of firms across 26 transition countries to examine the determinants of trust in the transition process. We first introduce a new measure of trust between firms: the level of prepayment demanded by suppliers from their customers in advance of delivery. Using this new measure, we confirm earlier findings that trust is higher where firms have confidence in third party enforcement through the legal system. However, the fairness and honesty of the courts are a more important determinant of interfirm trust than are the courts’ efficiency or ability to enforce decisions. We then examine the role of business networks in building trust and find that networks based around personal ties – family and friends – and business associations actively promote the development of trust, while business networks based on enterprise insiders and government agencies do not. Finally, we find that country-level effects are significantly more important determinants of interfirm trust than are firm-level effects.http://deepblue.lib.umich.edu/bitstream/2027.42/40026/3/wp640.pd

Trust in Transition: Cross-country and Firm Evidence

This paper uses data from a large survey of firms across 26 transition countries to examine the determinants of trust in the transition process. We first introduce a new measure of trust between firms: the level of prepayment demanded by suppliers from their customers in advance of delivery. Using this new measure, we confirm earlier findings that trust is higher where firms have confidence in third party enforcement through the legal system. However, the fairness and honesty of the courts are more important determinants of inter-firm trust than the courts’ efficiency or ability to enforce decisions. We then examine the role of business networks in building trust and find that networks based around personal ties – family and friends – and business associations actively promote the development of trust, while business networks based on enterprise insiders and government agencies do not. Finally, we find that country-level effects are significantly more important determinants of inter-firm trust than firm-level effects.transition, trust, prepayment, courts, business networks

Law and Finance in Transition Economies

This paper offers the first comprehensive analysis of legal change in the protection of shareholder and creditor rights in transition economies and its impact on the propensity of firms to raise external finance. Following La Porta et al. (1998), the paper constructs an expanded set of legal indices to capture a range of potential conflicts between different stakeholders of the firm. It supplements the analysis of the law on the books with an analysis of the effectiveness of legal institutions. Our main finding is that the effectiveness of legal institutions has a much stronger impact on external finance than does the law on the books, despite legal change that has substantially improved shareholder and creditor rights. This finding supports the proposition that legal transplants and extensive legal reforms are not sufficient for the evolution of effective legal and market institutions.shareholder and creditor rights, legal effectiveness, external finance, transition

Ein tschechisches Wunder? Zur Rolle politikinduzierter Anreizstrukturen im Transformationsprozeß

Der Transformationsprozeß in der Tschechischen Republik zeichnet sich im Vergleich zu anderen Staaten Mittel- und Osteuropas durch eine relativ niedrige Arbeitslosigkeit und durch ein hohes Maß an monetärer Stabilität aus. Dieses "Wunder" läßt sich primär auf die Besonderheiten der tschechischen Wirtschaftspolitik zurückführen. Durch effektive Lohnkontrollen auf dem Arbeitsmarkt hat die tschechische Regierung eine Dekapitalisierung von Staatsunternehmen verhindern können. Gleichzeitig hat das niedrige Lohnniveau die Schaffung neuer Arbeitsplätze vor allem im privaten Dienstleistungssektor begünstigt. Die Sozialpolitik, die ihre staatliche Unterstützung auf Umschulungen und zeitlich befristete Lohnsubventionen konzentriert und nicht durch großzügige Arbeitslosenunterstützung Schwarzarbeit und Anspruchsdenken fördert, hat sich als kostengünstiges und effektives Instrument zur Eindämmung der sozialen Kosten der Transformation erwiesen. Auf dem Kapitalmarkt hat die frühe Rekapitalisierung des tschechischen Bankensystems eine Finanzkrise bislang vermeiden helfen. Eine straffe Geld- und Fiskalpolitik wurde durch absolute Kreditobergrenzen für Staatsunternehmen ergänzt. Die Budgetbeschränkungen für Staatsunternehmen wurden wirksam gehärtet, und eine Überschuldung wurde vermieden. Dies erweist sich bei der Privatisierung als Vorteil und ermöglicht es, das Bankensystem als effektive Kontrollinstanz in der Phase der Umstrukturierung einzusetzen. Das Ausbleiben einer Konkurswelle nach Einführung des Konkursgesetzes und die vergleichsweise niedrigen Inflationsraten in der Tschechischen Republik sind positive Indizien für die anhaltende Stabilität auf dem tschechischen Kapitalmarkt. --