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Economic Growth and Structural Features of Transition: Theoretical Framework and General Overview
No full textAbstract
The ‘Great Transformation’ that occurred in Eastern Europe after 1989 involved many spheres: institutional, political, social and economic. Even considering only the economic sphere – in addition to the overall transition to market economies – this transformation involved several structural
changes, affecting economic growth and performance in many markets (withmanifest effects in the labourmarket), as well as international relations with other regions of the world.
Especially if formalized, a simple theoretical model is unable to capture the complexities of this transformation. The relations between variables are numerous, are also unstable over time and exhibit significant feedback from economic and structural changes to institutional change itself. Thus, a heuristic model is probably more adequate to illustrate complex, multi-faceted phenomena and links between variables. In this chapter, we propose a theoretical framework aiding understanding
of the main features of the complex dynamics and relations characterizing transition processes, with special reference to Central and Eastern European Countries (CEECs). The heuristic model is integrated and supported by a partial review of the most important literature, both theoretical and empirical, concerning the specific aspects discussed. Its aim is also – in a unified framework of analysis – to show the links, interdependences and complementarities between the specific studies included in the chapters of the volume and to illustrate the rationale behind the sequence of the individual
studies. In addition, in order to better understand the importance of the various topics, we present some key data concerning the process of institutional, economic and structural change over a 20-year period, especially in those
CEECs which became members of the EU in the 2004 and 2007 enlargements (NMS). This general information (provided in the Appendix) offers an introductory overview of the main characteristics of transition, to be complemented by the more specific empirical evidence provided in subsequent chapters.
The structure of this chapter is as follows: The heuristic model is presented with the aid of a graph summarizing the intricate links between the main variables (Section 2). Then we develop the five main areas of the theoretical framework. The starting point is the process of institutional change, of which the main features and effects on the economic systems
are examined (Section 3). One prominent economic consequence of transition concerns economic growth and development (Section 4). Institutional change and economic growth also interact with specific aspects of structural
change (Section 5), concerning the sectoral specialization of economic systems and the spatial distribution of economic activities. The impact of transition, growth and structural change is particularly significant in labour markets (analysed in Section 6), in terms of their quantitative (unemployment
and employment dynamics) and qualitative (quality of jobs, youth performance) effects; also the dynamics in income inequality are investigated in this section. The transition process also entailed new foreign relations (Section 7), these countries now gravitate mostly towards Western Europe (increased trade integration is only one of the several aspects) and are much more ‘vulnerable’ to shocks upsetting the global economy; in this section, the consequences of the 2008–2009 financial and economic crisis are briefly sketched. Lastly, the conclusions (Section 8) also stress the appropriateness of following a ‘comparative’ approach in the investigation of transition countries
Institutional Change, Regional Features and Aggregate Performance in Eight EU's Transition Countries
No full text
Employment, Productivity and Models of Growth in the EU
No full textABSTRACT
Purpose – The purpose of this paper is to identify the main “models of growth” characterising the EU countries in the last two decades, with particular reference to the employment-productivity relationship, and to reveal the key determinants of productivity.
Design/methodology/approach – After a survey of the relevant literature, the empirical section analyses the “models of growth” by graphical inspection, identifying four models (for EU-27 in the 1990-2008 period): extensive, intensive, virtuous, and stagnant. Then different econometric investigations (beta convergence, dynamic panel with GMM estimation, fixed effects panel, cross-section) are used to test the “diminishing returns of employment rate” hypothesis (for the 2000-2006 period), to assess the convergence processes and to determine the key variables affecting productivity.
Findings – The main finding is the confirmation of the hypothesis mentioned: high employment growth is likely to lead to slower productivity growth. Moreover, besides verifying the beta convergence of productivity per worker, the most significant determinants of productivity are the following: education, a transition index, some structural indicators, and a “shadow economy” proxy. Finally, the descriptive analysis shows that “old” EU countries, coming from two decades of “jobless growth”, shifted to an “extensive” growth model; in contrast, transition countries (NMS) followed the opposite path: reducing employment and raising productivity.
Research limitations/implications – It would be advisable to extend the period of the analysis, as soon as new data become available.
Practical implications – The main policy implication is to get the EU Lisbon strategy – i.e. to create “more and better” jobs – working effectively.
Originality/value – The most original finding is the clear assessment of an employment-productivity trade-off. Also, the different models of growth are categorised simply and effectively
Labour, Productivity and Growth: an Introductory Essay
No full textThe purpose of this paper is to introduce the special issue on "Labour, Productivity and Growth".
The paper discusses the articles in the special issue which investigate from different points of view the main theme – labour, productivity and growth – by employing a variety of econometric methods. These include: a) improvement of the evaluation of the impact of labour market flexibility on economic performance; b) analysis of the macroeconomic law of decreasing returns to labour; c) a new panel cointegration method; d) a re-interpretation of cointegration analysis to assess the impact of incomes policy. Institutional variables, in particular the system of industrial relations, are duly considered.
The articles in the special issue highlight different causes of sluggish economic (productivity) growth in Europe, resorting not only to traditional macroeconomic variables, such as total factor productivity and labour market flexibility, but also to such factors as neo-corporatist industrial relations and management practices, which are generally neglected in the literature.
The paper introduces a number of articles proposing innovations in the interpretation and application of a wide range of theoretical approaches and econometric methodologies. It also discusses several policy suggestions for fighting sluggish productivity growth, including investment in research and development, human capital, flexicurity, innovative industrial relations practices and high performance workplace practices considered able to affect also macroeconomic performance
Domestic demand and global production in the Eurozone: A multi-regional input-output assessment of the global crisis
No full textThis paper studies the effects of domestic and foreign demand impulses in euro area economies following the Great Recession of 2008-2009 and the Eurozone crisis of 2011-2012. Using a global Input-Output framework we apply a set of metrics to assess spillover effects of international trade in intermediates triggered by the dynamics of final demand. Our findings suggest that while cross-country trade spillovers have played a crucial role during the Great Recession, they have had a moderate impact when compared with the role of domestic sources of final demand during the Eurozone crisis. Hence, a strategy of coordinated fiscal austerity cannot be sustained by empirical evidence
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