It remains under-appreciated that deep economic integration (which goes beyond free trade agreeme... more It remains under-appreciated that deep economic integration (which goes beyond free trade agreements) can induce powerful actors to support increasing general state capacities in less-developed countries. In this paper we ask: under what conditions can deep economic integration yield increases in state capacity? We measure institutional change in 17 Eastern and Central European countries (EU membership candidates) exposed to similar challenges of deep integration and find large variation in the evolution of state capacities. To understand this variation, we put forward a conceptual framework stressing three main areas (judiciary, bureaucracy, and competition policy) and supporting a set of hypotheses based on the ideas of Montesquieu, Weber and Smith, respectively. From testing these hypotheses, we empirically identify key relationships and specific reform implementation sequences. Our main result is the centrality of an intricate relationship between bureaucratic independence and judiciary capacity as a main driver of institutional change. * We would like to thank
Educational Inputs and Outcomes Before the Transition from Communism* Conventional wisdom suggest... more Educational Inputs and Outcomes Before the Transition from Communism* Conventional wisdom suggests that the stocks of human capital were one of the few positive legacies from communism. However, if factories under communism were so inefficient, why would the education system not have been? Using the education production function approach and new data on educational inputs and outcomes from 1960 to 1989, we find evidence suggesting that the official human capital stocks figures were 'over-estimated' during the communist period. In other words, we find that the official human capital stock numbers are significantly higher than those predicted not only in relation to countries at similar levels of development, but also on the basis of educational systems with comparable features and efficiency levels.
Conventional wisdom suggests that the stocks of human capital were one of the few positive legaci... more Conventional wisdom suggests that the stocks of human capital were one of the few positive legacies from communism. However, if factories under communism were so inefficient, why would the education system not have been? Using the education production function approach and new data on educational inputs and outcomes from 1960 to 1989, we find evidence suggesting that the official human capital stocks figures were "over-estimated" during the communist period. In other words, we find that the official human capital stock numbers are significantly higher than those predicted not only in relation to countries at similar levels of development, but also on the basis of educational systems with comparable features and efficiency levels.
... Elle met l'accent sur la réallocation de la main-d'uvre provoquée par l'exode... more ... Elle met l'accent sur la réallocation de la main-d'uvre provoquée par l'exode rural vers les villes et comprend, entre autres auteurs, Loayza (1996), Marcouiller et Young (1995), Mead et Morrisson (1996), Patel et Srivastava (1996), Rauch (1991) et Stark (1982). ...
... the investments in new data that have been made in recently, and ... Adelman, Irma and Dusan ... more ... the investments in new data that have been made in recently, and ... Adelman, Irma and Dusan Vujovic, Institutional and Policy Aspects of the Transition: An Empirical ... Social Institutions:A Review of Growth Evidence, Oxford: Oxford University, Institute of Economics and Statistics ...
There are two strands in the empirical literature on economic growth in transition economies. One... more There are two strands in the empirical literature on economic growth in transition economies. One focuses on the impact of reforms, while the other emphasizes sustainability issues and the growth prospects these economies face. The most common strategy, in the latter, has been to use coefficients from growth regressions, on large samples of developing countries, and impose them on transition economies' data to obtain projected growth rates. We refer to it as the BLR approach (because it uses specifications from Barro, and Levine and Renelt). We claim that the reported growth rates are suspiciously similar, painting an overly optimistic picture and yielding few policy lessons. We re-estimate the BLR equations for data on transition economies themselves and find that government expenditures have been positively associated and human capital has been negatively associated with output growth. These results contrast sharply with the assumptions and findings from the BLR approach, questioning its might and challenging our understanding of the transition process in its key dimension.
What are the determinants of firm entry and exit in Brazil? How do entry and exit rates affect pr... more What are the determinants of firm entry and exit in Brazil? How do entry and exit rates affect productivity? This paper tries to answer these questions using panel data for about 104 Brazilian manufacturing sectors (3-digit level) for the period 1996 to 2002. Our results show that the share of exports in sectoral output is one main determinant of entry
How effective is foreign direct investment in supporting economic performance in low-income count... more How effective is foreign direct investment in supporting economic performance in low-income countries? This paper assesses this question using meta-regression-analysis techniques on a set of 550 and 554 estimates of the impact of FDI on economic performance from 103 micro and 72 macro-studies, respectively. The results suggest that (a) the estimated effects tend to be larger in the macro/country than in the micro/firm studies, (b) the effect is significantly greater in low-than in middle-income countries, and (c) econometric method and specification choice seem central to understand the observed variation in the estimates. The paradox this study raises is how to reconcile the main lesson from the literature (that the effect emerges only for countries that have reached certain thresholds, mainly with respect to human capital and financial development) with the finding that the effects are larger for counties that are typically far from reaching such critical thresholds. We argue that considerations of the gap between private and social returns, albeit missing in most of the current academic and policy discussions, may provide the key.
... The crucial difficulty relates to data. Trade data for the former Soviet Union (FSU) countrie... more ... The crucial difficulty relates to data. Trade data for the former Soviet Union (FSU) countries (Baltic and CIS) are taken from Belkindas and Ivanova (1995) for the years 1990-1994 and from the IMF Direction of Trade Statistics (DOTS) for the years 1994-1998. ...
The favored approach in the literature on the growth prospects for transition economies is based ... more The favored approach in the literature on the growth prospects for transition economies is based on specifications from and . This paper examines this literature critically by identifying and testing for the underlying assumptions. Our main finding is that this approach performs poorly in the transition context. Our results indicate that, almost a decade after the transition began, the former centrally planned economies are still structurally different from market economies at similar levels of per capita income. The legacies of central planning are more resilient than previously thought.
What are the main barriers to firm entry and exit in developing countries and how do they differ ... more What are the main barriers to firm entry and exit in developing countries and how do they differ from barriers to firm operation and growth? How important is the institutional and regulatory framework in this respect? This paper examines such questions using case-study evidence from the Brazilian textiles and electronics industries. We find that not only these institutional barriers are high in Brazil but also that they seem to have risen since the early 1990s, and that their effects vary across sectors. We also provide evidence from a survey we carried out in 2005 suggesting that institutions are more important as barriers to entry than as barriers to firm operation and growth. #
A large econometric literature evaluates the effects of reform on economic performance. This pape... more A large econometric literature evaluates the effects of reform on economic performance. This paper tries to assess these efforts focusing on the experience of the transition economies. We collect information from 43 econometric studies yielding over 300 observations (coefficients). We find that a third of these are positive and significant, another third is negative and significant and the final third is not statistically significantly different from zero. The data set we put together to try to explain this variation comprises a quantification of various studies' characteristics (inter alia, how the econometric methodology deals with endogeneity, with different lag structures, with the use of panel or cross-sectional data, and with different measures of reform). We investigate the sign and the magnitude, for the actual as well as the cumulative effect. Our findings suggest that the use of panel methods and the time coverage are important in explaining this variation. Of particular interest is that controlling for institutions and initial conditions decreases the probability of finding a large and positive effect of reform on growth.
In an era of rapid technological change, information exchange, and emergence of knowledge-intensi... more In an era of rapid technological change, information exchange, and emergence of knowledge-intensive industries it is critical to be able to identify the future skill needs of the labour market. Growing unemployment in EU member states and pre-accession countries in Eastern Europe combined with technological changes which make the skills of a significant number of workers obsolescent each year demand adequate knowledge of medium- and long-term demand for specific skills. Some EU members states have developed employment forecasting methods to identify future skill requirements which take account of the sectoral, occupational, and educational and training factors which influence supply and demand in the labour market for skills. A number of countries in Eastern Europe which are preparing to join the EU are interested in developing employment forecasting models that would provide them with similar information relating to skills. Taking account of the requirements of the Single European ...
What accounts for the dynamics of financial reforms? This paper identifies the political regime a... more What accounts for the dynamics of financial reforms? This paper identifies the political regime as main factor. Focusing on democratization and financial reform, it puts forward novel evidence for a U-shaped relation, across countries, over time as well as in a panel setting for different reform measures and a wide range of estimators. Partial democracy is a main obstacle to financial reforms and democratization, when incomplete, may lead to severe financial reform reversals. We also show that, even when de jure set off de facto financial liberalization, the political regime still play a fundamental role in the reform's implementation phase.
The analysis of the consequences of socio-political instability has been a central theme in recen... more The analysis of the consequences of socio-political instability has been a central theme in recent macroeconomic research, in general, and in the economic growth literature, in particular. There are two different views on the nature of the relationship between political instability and growth. Some authors submit that political instability disrupts productive activities and increases uncertainty. By doing so, it undermines the incentives for the accumulation of physical capital with detrimental consequences for the rate of economic growth. Other economists argue that economic growth leads to more political instability because growth entails substantial structural changes that undo political coalitions and induce painful read*justments in the balance of power among different interest groups. Despite the negative relationship between political instability and economic growth having been elevated to “stylized fact ” status, the empirical studies on which this assessment is based have b...
The transition from centrally planned to market economy involves a process of massive occupationa... more The transition from centrally planned to market economy involves a process of massive occupational change that has been largely neglected in the literature. This paper investigates this process using data from the 1995 Estonian Labour Force Survey. We find that between 35 and 50 percent of wage earners changed occupations from 1989 to 1995 and that job tenure is a consistently important determinant of occupational mobility. Our results also show the speed with which the market mechanism takes root: the returns to current and alternative occupations play, over these few years, increasingly important roles in explaining occupational change.
The transition from centrally planned to market economy entails a massive process of occupational... more The transition from centrally planned to market economy entails a massive process of occupational change that has been largely neglected in the literature. This paper fills this void by providing a detailed description of this process and by investigating its determinants and consequences. Using data from a representative survey of Estonian workers from 1989 to 1995, we estimate that between 35 and 50 % of all employed workers changed occupation in this short period of time. Further, we find that the bulk of these occupational switches occurred in the early years of the transition. As for the determinants of occupational change, we find that the main factors lowering the probability of an employed worker changing occupation are gender (female) and longer job tenure. Surprisingly, (present or future) returns to current and alternative occupations do not play a systematic role in explaining the probability of switching. Regarding the impact of occupational change, we find that the pri...
It remains under-appreciated that deep economic integration (which goes beyond free trade agreeme... more It remains under-appreciated that deep economic integration (which goes beyond free trade agreements) can induce powerful actors to support increasing general state capacities in less-developed countries. In this paper we ask: under what conditions can deep economic integration yield increases in state capacity? We measure institutional change in 17 Eastern and Central European countries (EU membership candidates) exposed to similar challenges of deep integration and find large variation in the evolution of state capacities. To understand this variation, we put forward a conceptual framework stressing three main areas (judiciary, bureaucracy, and competition policy) and supporting a set of hypotheses based on the ideas of Montesquieu, Weber and Smith, respectively. From testing these hypotheses, we empirically identify key relationships and specific reform implementation sequences. Our main result is the centrality of an intricate relationship between bureaucratic independence and judiciary capacity as a main driver of institutional change. * We would like to thank
Educational Inputs and Outcomes Before the Transition from Communism* Conventional wisdom suggest... more Educational Inputs and Outcomes Before the Transition from Communism* Conventional wisdom suggests that the stocks of human capital were one of the few positive legacies from communism. However, if factories under communism were so inefficient, why would the education system not have been? Using the education production function approach and new data on educational inputs and outcomes from 1960 to 1989, we find evidence suggesting that the official human capital stocks figures were 'over-estimated' during the communist period. In other words, we find that the official human capital stock numbers are significantly higher than those predicted not only in relation to countries at similar levels of development, but also on the basis of educational systems with comparable features and efficiency levels.
Conventional wisdom suggests that the stocks of human capital were one of the few positive legaci... more Conventional wisdom suggests that the stocks of human capital were one of the few positive legacies from communism. However, if factories under communism were so inefficient, why would the education system not have been? Using the education production function approach and new data on educational inputs and outcomes from 1960 to 1989, we find evidence suggesting that the official human capital stocks figures were "over-estimated" during the communist period. In other words, we find that the official human capital stock numbers are significantly higher than those predicted not only in relation to countries at similar levels of development, but also on the basis of educational systems with comparable features and efficiency levels.
... Elle met l'accent sur la réallocation de la main-d'uvre provoquée par l'exode... more ... Elle met l'accent sur la réallocation de la main-d'uvre provoquée par l'exode rural vers les villes et comprend, entre autres auteurs, Loayza (1996), Marcouiller et Young (1995), Mead et Morrisson (1996), Patel et Srivastava (1996), Rauch (1991) et Stark (1982). ...
... the investments in new data that have been made in recently, and ... Adelman, Irma and Dusan ... more ... the investments in new data that have been made in recently, and ... Adelman, Irma and Dusan Vujovic, Institutional and Policy Aspects of the Transition: An Empirical ... Social Institutions:A Review of Growth Evidence, Oxford: Oxford University, Institute of Economics and Statistics ...
There are two strands in the empirical literature on economic growth in transition economies. One... more There are two strands in the empirical literature on economic growth in transition economies. One focuses on the impact of reforms, while the other emphasizes sustainability issues and the growth prospects these economies face. The most common strategy, in the latter, has been to use coefficients from growth regressions, on large samples of developing countries, and impose them on transition economies' data to obtain projected growth rates. We refer to it as the BLR approach (because it uses specifications from Barro, and Levine and Renelt). We claim that the reported growth rates are suspiciously similar, painting an overly optimistic picture and yielding few policy lessons. We re-estimate the BLR equations for data on transition economies themselves and find that government expenditures have been positively associated and human capital has been negatively associated with output growth. These results contrast sharply with the assumptions and findings from the BLR approach, questioning its might and challenging our understanding of the transition process in its key dimension.
What are the determinants of firm entry and exit in Brazil? How do entry and exit rates affect pr... more What are the determinants of firm entry and exit in Brazil? How do entry and exit rates affect productivity? This paper tries to answer these questions using panel data for about 104 Brazilian manufacturing sectors (3-digit level) for the period 1996 to 2002. Our results show that the share of exports in sectoral output is one main determinant of entry
How effective is foreign direct investment in supporting economic performance in low-income count... more How effective is foreign direct investment in supporting economic performance in low-income countries? This paper assesses this question using meta-regression-analysis techniques on a set of 550 and 554 estimates of the impact of FDI on economic performance from 103 micro and 72 macro-studies, respectively. The results suggest that (a) the estimated effects tend to be larger in the macro/country than in the micro/firm studies, (b) the effect is significantly greater in low-than in middle-income countries, and (c) econometric method and specification choice seem central to understand the observed variation in the estimates. The paradox this study raises is how to reconcile the main lesson from the literature (that the effect emerges only for countries that have reached certain thresholds, mainly with respect to human capital and financial development) with the finding that the effects are larger for counties that are typically far from reaching such critical thresholds. We argue that considerations of the gap between private and social returns, albeit missing in most of the current academic and policy discussions, may provide the key.
... The crucial difficulty relates to data. Trade data for the former Soviet Union (FSU) countrie... more ... The crucial difficulty relates to data. Trade data for the former Soviet Union (FSU) countries (Baltic and CIS) are taken from Belkindas and Ivanova (1995) for the years 1990-1994 and from the IMF Direction of Trade Statistics (DOTS) for the years 1994-1998. ...
The favored approach in the literature on the growth prospects for transition economies is based ... more The favored approach in the literature on the growth prospects for transition economies is based on specifications from and . This paper examines this literature critically by identifying and testing for the underlying assumptions. Our main finding is that this approach performs poorly in the transition context. Our results indicate that, almost a decade after the transition began, the former centrally planned economies are still structurally different from market economies at similar levels of per capita income. The legacies of central planning are more resilient than previously thought.
What are the main barriers to firm entry and exit in developing countries and how do they differ ... more What are the main barriers to firm entry and exit in developing countries and how do they differ from barriers to firm operation and growth? How important is the institutional and regulatory framework in this respect? This paper examines such questions using case-study evidence from the Brazilian textiles and electronics industries. We find that not only these institutional barriers are high in Brazil but also that they seem to have risen since the early 1990s, and that their effects vary across sectors. We also provide evidence from a survey we carried out in 2005 suggesting that institutions are more important as barriers to entry than as barriers to firm operation and growth. #
A large econometric literature evaluates the effects of reform on economic performance. This pape... more A large econometric literature evaluates the effects of reform on economic performance. This paper tries to assess these efforts focusing on the experience of the transition economies. We collect information from 43 econometric studies yielding over 300 observations (coefficients). We find that a third of these are positive and significant, another third is negative and significant and the final third is not statistically significantly different from zero. The data set we put together to try to explain this variation comprises a quantification of various studies' characteristics (inter alia, how the econometric methodology deals with endogeneity, with different lag structures, with the use of panel or cross-sectional data, and with different measures of reform). We investigate the sign and the magnitude, for the actual as well as the cumulative effect. Our findings suggest that the use of panel methods and the time coverage are important in explaining this variation. Of particular interest is that controlling for institutions and initial conditions decreases the probability of finding a large and positive effect of reform on growth.
In an era of rapid technological change, information exchange, and emergence of knowledge-intensi... more In an era of rapid technological change, information exchange, and emergence of knowledge-intensive industries it is critical to be able to identify the future skill needs of the labour market. Growing unemployment in EU member states and pre-accession countries in Eastern Europe combined with technological changes which make the skills of a significant number of workers obsolescent each year demand adequate knowledge of medium- and long-term demand for specific skills. Some EU members states have developed employment forecasting methods to identify future skill requirements which take account of the sectoral, occupational, and educational and training factors which influence supply and demand in the labour market for skills. A number of countries in Eastern Europe which are preparing to join the EU are interested in developing employment forecasting models that would provide them with similar information relating to skills. Taking account of the requirements of the Single European ...
What accounts for the dynamics of financial reforms? This paper identifies the political regime a... more What accounts for the dynamics of financial reforms? This paper identifies the political regime as main factor. Focusing on democratization and financial reform, it puts forward novel evidence for a U-shaped relation, across countries, over time as well as in a panel setting for different reform measures and a wide range of estimators. Partial democracy is a main obstacle to financial reforms and democratization, when incomplete, may lead to severe financial reform reversals. We also show that, even when de jure set off de facto financial liberalization, the political regime still play a fundamental role in the reform's implementation phase.
The analysis of the consequences of socio-political instability has been a central theme in recen... more The analysis of the consequences of socio-political instability has been a central theme in recent macroeconomic research, in general, and in the economic growth literature, in particular. There are two different views on the nature of the relationship between political instability and growth. Some authors submit that political instability disrupts productive activities and increases uncertainty. By doing so, it undermines the incentives for the accumulation of physical capital with detrimental consequences for the rate of economic growth. Other economists argue that economic growth leads to more political instability because growth entails substantial structural changes that undo political coalitions and induce painful read*justments in the balance of power among different interest groups. Despite the negative relationship between political instability and economic growth having been elevated to “stylized fact ” status, the empirical studies on which this assessment is based have b...
The transition from centrally planned to market economy involves a process of massive occupationa... more The transition from centrally planned to market economy involves a process of massive occupational change that has been largely neglected in the literature. This paper investigates this process using data from the 1995 Estonian Labour Force Survey. We find that between 35 and 50 percent of wage earners changed occupations from 1989 to 1995 and that job tenure is a consistently important determinant of occupational mobility. Our results also show the speed with which the market mechanism takes root: the returns to current and alternative occupations play, over these few years, increasingly important roles in explaining occupational change.
The transition from centrally planned to market economy entails a massive process of occupational... more The transition from centrally planned to market economy entails a massive process of occupational change that has been largely neglected in the literature. This paper fills this void by providing a detailed description of this process and by investigating its determinants and consequences. Using data from a representative survey of Estonian workers from 1989 to 1995, we estimate that between 35 and 50 % of all employed workers changed occupation in this short period of time. Further, we find that the bulk of these occupational switches occurred in the early years of the transition. As for the determinants of occupational change, we find that the main factors lowering the probability of an employed worker changing occupation are gender (female) and longer job tenure. Surprisingly, (present or future) returns to current and alternative occupations do not play a systematic role in explaining the probability of switching. Regarding the impact of occupational change, we find that the pri...
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