Standardization union effects: the case of EU enlargement

The analysis of trade policy shows growing interest in various types of “standards”. While technical regulations and standards are introduced to protect the interest of consumers, they can also act as technical barriers to trade (TBT), as foreign suppliers complying with national regulations might be required to bear certain costs of adjustment to the new regime. Recent literature focused on the concept of standards and concluded that shared standards promote trade. We instead set our attention to technical regulations of the European Union and concentrate on their effects on trade costs. The analysis is inspired by Gandal and Shy’s (2001) cost reducing standardization union theory. This paper summarizes results of research undertaken within a larger product assessing importance of technical barriers to trade for new EU members. The recent empirical study by Hagemejer (2005), based on detailed trade data of the EU. He has shown that in sectors where the EU technical regulations are most complicated and require costly adaptation, the trade within EU is booming. He argues that the trade between EU members is more concentrated within the high-TBT products, while the imports from outside are focused on the low-TBT or no-TBT products. Thus, EU technical regulations might in fact be trade diverting if the difference in productivity between intra and extra-EU partners is large. In this context we analyze the pattern of new members’ exports to the “old” EU. We calculate the trade coverage of various standardisation approaches and analyze the comparative advantage structure of the new EU members. We demonstrate that the structure of TBT’s affecting exports from new EU members is slowly converging with the one that characterizes intra-EU trade. Therefore, we expect that CEEC’s countries will benefit from applying common technical regulations of the EU after accession. In the last section of our paper we report the results of questionnaire-based research made among Polish companies in December of 2004, i.e. after the Eastern enlargement. It seems that the adjustment costs were moderate and the adaptation process to new technical regulations is already completed. Therefore, one can expected welfare gains for new members of the EU. We perform a CGE simulation using a GTAP model to assess these gains.EU enlargement; technical barriers to trade; international trade

Internationalization and economic performance of enterprises: evidence from firm-level data

This paper provides evidence on the relative performance of internationalized firms using Polish firm-level data spanning over the period of 1996-2005. We distinguish between three modes of internationalization: exporting, importing of capital goods and foreign direct investment. Our results point strongly at superior performance of exporters vs. non-exporters importers vs. non-importers and foreign affiliates vs. domestic firms. We also find evidence for significant horizontal and backward productivity spillovers from all three types of international activity.internationalization; productivity; panel firm-level data

Is the Impact Really That High? The Effect of FDI in Transition

Literature is not clear on the eect of FDI on the economic performance in hosting countries. The analysed eects include productivity, propensity to export, access to financial markets, etc. Although foreign subsidiaries usually perform better than the average of the hosting economies, sometimes the selection eect is found to be considerable. We use a unique dataset based on accounting annual reports to the statistical authorities by all medium and large Polish enterprises over a period 1997-2006. We match firms with FDI entry and to a control group of non-foreign owned companies to disentangle the eect of self-selection and FDI entry. We also distinguish explicitly between foreign ownership and privatisation through a foreign investor. We find strong support of the view that foreign ownership increases access to financing. Evidence suggests also that although FDI enters more frequently companies who already participate in the international trading networks, while approximately 20% of the export intensity may be consistently on average attributed to the treatment effect. On the other hand, we were not able to confirm large effects on effciency not profitability, while the size of the effects are dierent for greenfield investment and private acquisitions as opposed to privatisation.FDI, transition, propensity score matching, Poland, firm-level analysis

Implications of the Doha Round negotiations in services for Poland

Using a computable general equilibrium model we assess the effects of services trade liberalization in Poland and its major trading partners in the context of the WTO Doha Round negotiations and the ongoing process of trade liberalization within the enlarged European Union. The paper provides a thorough descriptive analysis of the data on trade in services. It gives a complete picture of the sectoral and geographical structure of Poland’s trade in services in 2007. We also provide an analysis of revealed comparative advantage indices based on sectoral data. The review of literature is focused on a discussion of the methodology for assessing the barriers to trade in services. The core of the paper consists of a CGE simulation using the GTAP model. We employ the Hoekman (1995) tariff equivalents as a proxy for the initial level of trade barriers. Our four scenarios include those of complete liberalization, EU-only liberalization and two intermediate scenarios. The most optimistic scenario is expected to bring a 0.9% increase in Polish GDP and welfare improvement of close to 0.8% of GDP value. However, more than half of this gain is attributed to the liberalization within the EU that is bound to happen independently from the Doha process.trade liberalization, Doha Round, computable general equilibrium modelling

Is the Impact Really That High? The Effect of FDI in Transition

Literature is not clear on the effect of FDI on the economic performance in hosting countries. The analysed effects include productivity, propensity to export, access to financial markets, etc. Although foreign subsidiaries usually perform better than the average of the hosting economies, sometimes the selection effect is found to be considerable. In this paper we use a unique dataset based on accounting annual reports to the statistical authorities by all medium and large Polish enterprises over a period 1997-2006. We apply a propensity score matching technique to disentangle the effect of self-selection and FDI entry (treatment). We also distinguish explicitly between foreign ownership and privatisation through a foreign investor. We find strong support of the view that foreign ownership increases access to financing. Evidence suggests also that although FDI enters more frequently companies who already participate in the international trading networks, 20% of the export intensity may be consistently attributed to the treatment effect. On the other hand, we were not able to confirm large effects on efficiency, nor in the case of rentability, while the sizes of the effects are different for greenfield and private acquisitions as opposed to privatisation.FDI, transition, propensity score matching

Impact of competition and business cycles on the behaviour of monopolistic markups in the Polish economy

The aim of this study is to analyse the impact of competition, both internal and external, and of the business cycle on monopolistic markups in the Polish economy. The results show that there are significant markups in several sectors of the economy which complies with earlier estimations by the authors. According to the estimations carried out, competition has a significant impact on the level of markups. This result applies both to internal competition, measured by market concentration, and foreign competition, measured by import penetration ratios. In addition, there was a significant negative correlation between markups and the macroeconomic cycle which seems to confirm the conclusions from numerous theoretical macro and microeconomic models. The results also point to a positive but less clear correlation between the sectoral cycle and the level of markups. A different reaction of markups to the sectoral and macroeconomic cycles may result from a different nature of adjustments of businesses in reaction to exogenous shocks affecting either the sectoral or the macroeconomic environment of the enterprises.markups, microeconometrics, microeconomics, monopoly power

The long run-effects of the Poland's accession to the eurozone. Simulation using POLDYN - a dynamic computable general equilibrium model.

The aim of this paper is to assess the non-monetary effects of the euro accession of Poland. The literature identifies two channels that potentially may affect the economy: (i) diminishing of investment risk premia through lower interest rates and cost of capital services and (ii) trade creation effects due to elimination of currency transaction spreads, better price comparability and elimination of currency risk. We employ a dynamic general equilibrium model with perfect foresight multiple households, adjustment cost of capital, disaggregated labor market. We directly model trade-driven productivity spillovers. Our simulations show a long run GDP gain from the euro accession at the level of 7.5% of benchmark GDP of which 90% is realized in first 10 years. The main factor behind growth is investment that leads to an extra 12.6 percent of extra capital accumulated in the long run. The welfare gains amount to roughly 2% of the value of GDP each year. The sensitivity analysis proves that the model behavior is reasonably resistant to parameter changes.dynamic computable general equilibrium, trade creation, monetary integration, Poland

Globalization and the Polish economy: stylized facts and simulations using a Computable General Equilibrium Model

The aim of the paper is to quantitatively assess the impact of globalization on the economy of Poland in the medium term. Four channels of the impact of globalization are distinguished: (i) trade openness, (ii) productivity improvement, (iii) labour migrations, (iv) liberalization of the services sector. We employ a computable general equilibrium model with multiple industries and households and imperfect competition features. Our results show positive and quite significant effects of globalization on the performance of the Polish economy, stemming mainly from productivity improvements and liberalization of services. The sizeable expected migrations result in negative effects of globalization by decreasing growth potential and causing upward pressure on wages. At the sectoral level, globalization is particularly beneficial to some exporting sectors and skilled segments of the labour market.globalization, computable general equilibrium, labour migrations, trade liberalization

Not all that glitters. The direct effects of privatization through foreign investment

Although foreign subsidiaries usually perform better than the average of the hosting economies, empirical literature has also established that the selection effect is statistically significant. In this paper we attempt to evaluate its economic relevance, using a unique dataset of annual financial reports by all medium and large Polish enterprises over a period 1996-2007. We match firms privatized with the use of FDI to a control group of non-privatized state owned companies in order to disentangle the effect of self-selection and FDI entry. Evidence suggests that although FDI enters more frequently into companies who already participate in the international trading networks, roughly half of the export intensity differential may be attributed to the entry of FDI. On the other hand, selection effects seem to dominate as far as efficiency is concerned, while only towards the end of the sample the positive effect of FDI on profitability may be confirmed.privatization, transition, propensity score matching, firm-level analysis, Poland

Factors driving the firms decision to export. Firm-level evidence from Poland.

The model by Melitz (2003) predicts that if firms differ in their productivity (TFP) and there exists a fixed costs of entry to export markets, firms begin exporting if productivity exceeds a certain threshold value. Productivity is thus a crucial factor behind firms' export market participation. To verify this, I estimate a simple probit model of the firms decision to export, based on the Polish manufacturing firm-level data. Estimation of productivity of individual firms is troublesome as the standard OLS method produces biased estimates due to the endogeneity of factor choice. I use a multi-stage semi-parametric approach, as proposed by Olley and Pakes (1996) controlling for endogeneity and the bias caused by firms exiting and entering the sample during the period under consideration. Besides determining the significance of the TFP coefficient in the probit regression, I examine the paths of productivity of firms entering the export market and make an attempt to identify the potential learning-by-exporting effects