Determinants of unemployment in Romania’s transition economy: analyzing the roles of government expenditure, population aging, inflation, human capital, and economic growth

This paper intends to analyze the effects of openness to trade on economic growth and competitiveness of the Central and Eastern European (CEE) countries. Although these countries are at different stages of development and integration with the European Union, there are not highlighted differences on trade openness. Trade policies of them have been oriented towards regional trade cooperation and also integrating into the global economy. The empirical analysis of this study consists on 1 5 - year panel data of 11 CEE countries over the period 2000 to 2014. The system GMM is used as the most appropriate estimation method that addresses various econometric challenges, including endogeneity problems. The growth rate of the sample countries is modelled as dependent on trade openness and a set of control variables such as initial level of income per capita, human capital, gross fix capital formation, FDI, labour force and some interaction variables with trade openness. The estimation results indicate that the positive effects of trade openness on economic growth are conditioned by the initial income per capita and other explanatory variables. Otherwise, there is not robust evidence between these two variables. Moreover, the trade openness is more beneficial to countries with higher level of initial income per capita, as well as trade openness favours countries with higher level of FDI and with a higher gross fixed capital formation. This paper intends to analyze the effects of openness to trade on economic growth and competitiviness of the Central and Eastern European (CEE) countries. Although these countries are at different stages of development and integration with European Union, there are not highlighted differences on trade openness. Trade policies of them have been oriented towards regional trade cooperation and also integrating into the global economy. The empirical analysis of this study consists on 1 5 - year panel data of 11 CEE countries over the period 2000 to 2014. The system GMM is used as the most appropriate estimation method that addresses various econometric challenges, including endogeneity problems. The growth rate of the sample countries is modelled as dependent on trade openness and a set of control variables such as: initial level of income per capita, human capital, gross fix capital formation, FDI, labour force and a number of interaction variables with trade openness. The estimation results indicate that the positive effects of trade openness on economic growth are conditioned by the initial income per capita and other explanatory variables, otherwise there is not robust evidence between these two variables. Moreover, the trade openness is more beneficial to countries with higher level of initial income per capita, as well as trade openness favours countries with higher level of FDI and with higher gross fixed capital formation. DOI: http://dx.doi.org/10.5755/j01.ee.27.2.14013

T HE application of capital theory to decisions on individual improvement, and in particular improvement of earning capacity, has provided a framework for the understanding of many aspects of observed behavior regarding education, health, occupational choice, mobility, etc., as rational investment of present resources for the purpose of enjoying future returns. The formulation by Friedman and Kuznets (1945) and the significant development of the theory by Becker (1962, 1964) and Mincer (1958, 1962) provided a novel view of the life cycle of earnings by linking it to the time profile of investment in human capital: People make most of their investments in themselves when they are young, and to a large extent by foregoing current earnings. Observed earnings are therefore relatively low at early years, and they rise as investment declines and as returns on past investments are realized. The main reason why investment is undertaken mostly by the young is that they have a longer period over which they can re-

The complex pathways behind positive impact of human capital investment on economic growth have gained considerable focus in recent decades. The investment in education, technology innovation, and skills development play a crucial role in driving sustainable economic development. Despite Pakistan’s growing population and investment in education and infrastructure, the economy continues to face challenges in achieving sustainable growth. This research explored the dynamic relationship between education levels (Illiterate, basic and advanced), gross fixed capital formation (GFCF), and economic growth in Pakistan. The relevant data spanning from 2000 to 2024 was derived from Government of Pakistan’s statistics. The ARDL cointegration was employed for data analysis. The empirical findings revealed that advanced education and GFCF were significant drivers of economic growth in the long run, whereas illiteracy had adverse impact on real GDP. Notably, the study found that basic education alone was insufficient to stimulate economic growth, and it highlighted the need for more advanced human capital in Pakistan. In the short run, the impact of advanced education and GFCF were mixed. The GFCF appeared to be hindered by inefficiencies in capital utilization. The study's results were robust and reliable as confirmed by diagnostic and stability tests. The findings underlined the importance of policy interventions aimed at reducing illiteracy, enhancing basic education outcomes, expanding access to advanced education, and improving capital formation efficiencies for sustainable economic growth in Pakistan.

Objectives: This paper summarises the findings of a report by Acedański et al. (2023) that focuses on the relationship between science and economic growth. The report was commissioned by the Conference of Rectors of Economic Universities (KRUE) and prepared by researchers from five public economic universities in Poland. The authors of the report and the KRUE aim to share their message with a wide audience that includes policymakers, academic experts, and students. Additionally, the article analyses the impact of research and higher education spending on convergence processes in Central and Eastern European countries. Research Design & Methods: The study examined different indicators, including government expenditure on basic research, higher education, and research and development. We utilised SURE models and observed that there was notable diversity in the convergence processes among the analysed countries. Additionally, we found a correlation between research spending and the rate of catching up. However, it is important to note that this relationship is not universal and varies across countries, even those within the same region. Findings: Acedański et al. (2023) report quantifies the relationship between science, higher education, GDP, and economic development in Poland. The report states that science and higher education sectors positively impact local economies, and individuals with higher education contribute the most to human capital resources in the economy, leading to GDP growth. However, Poland has a funding gap in research and science compared to highly developed countries as well as many Central and Eastern European countries. The report suggests that investment in a country’s education and higher education system is essential for generating developmental impulses and supporting its economy. Implications / Recommendations: The impact of scientific activity depends heavily on funding, especially through higher education institutions. In Poland, the salaries of academic teachers have decreased compared to other professions, and their position in the wage distribution is the worst it has been in the past two decades. Investing in a country’s education and higher education system is essential to support the economy. Acedański et al. (2023) suggest that a 0.1 percentage point increase in research and development expenditure, as a percentage of GDP, can lead to a 0.8 to 1.3 percentage point increase in GDP growth. However, the conclusion was based on panel data from EU countries, and the impact of scientific research on GDP may differ when analysing Central and Eastern European (CEE) countries. In this paper, we also present an extended analysis of the impact of science and education on economic growth through the lens of convergence processes. We show that the relationship above is not straightforward and represents substantial variability across countries, even those of the same region. Contribution / Value Added: Firstly, the report by Acedański et al. (2023) emphasises the importance of the science and higher education sector for economic growth. Their empirical research helps quantify the relationship between science, higher education, GDP, and economic development, offering a deeper understanding of this connection. The report complements previously published analyses and research on the topic. Secondly, our regional research shows that the convergence processes vary greatly among the analysed countries. The inclusion of spending on science, research, or higher education in the convergence equations has a varied impact on the assessment of the pace of the catching-up processes in the CEE region.

The concept of endogenous growth states that economic growth is caused by variables within the economy rather than external ones. This study's major goal is to demonstrate the link between education, human capital, and endogenous growth in Pakistan. For the period 1990–2021, time series data is used. The stationary is confirmed using the augmented dickey fuller (ADF) method. In this research, the non linear autoregressive distributed lag model (NARDL) technique is employed for the empirical analysis. Gross domestic product (GDP), education enrolment, human capital, inflation, trade, and gross fixed capital formation are the factors examined in this study. In the current research, gross domestic product, education enrollment, and human capital are dependent variables, while inflation, trade, gross fixed capital formation and education enrollment are independent variables. Inflation shows an inverse relationship with the gross domestic product, while trade and education enrollment show a positive relationship with the gross domestic product. Gross fixed capital formation shows an inverse relationship with human capital, while education enrollment and inflation also show a negative relationship with human capital. Gross fixed capital formation and trade show a positive impact on education enrollment, while inflation shows a negative impact on education enrollment. It is recommended that the government should decrease inflation to increase gross domestic product (GDP). This study suggests that education enrollment (EDUENROLL), trade (TRADE), and gross fixed capital formation (GFCF) also increase.

This study examines the relationship between artificial intelligence (AI) and economic growth, focusing specifically on the channels through which AI-driven innovation may affect GDP growth. AI innovation is proxies by the number of granted AI-related patents, which also reveals the strength and robustness of patent activity in this field. The econometric approach, OLS, FE, Difference and System GMM, is used to investigate the significant macroeconomic determinants, including inflation, population growth, unemployment, government expenditure, and gross fixed capital formation (GFCF). The study findings show that AI patents are negatively associated with GDP growth in this model. It suggests that, at the national level, AI-related innovations are yet to be transformed into measurable economic gains. A plausible explanation is that AI technologies remain in an initial stage of adoption and diffusion, and their implementation requires skilled labor, complementary infrastructure, and substantial upfront costs, factors that delay their productivity-enhancing effects. Besides, GFCF, government expenditure, and population growth show a significant positive effect on GDP growth across the countries. It shows the continued importance of old drivers of economic expansion, mainly inflation, demographic dynamics, public spending, and physical investment. However, mergers are a barrier to economic growth. Therefore, unemployment does not appear to exert a statistically significant impact on the model employed. The results suggest that AI's future growth is unclear and needs more study, particularly regarding how AI advances can lead to wider economic gains. For now, the data confirms that economic progress hinges on macroeconomic stability and investment; AI's potential for growth will probably emerge over time with institutional readiness and supportive economic contexts.

FISHERIES DEVELOPMENT AND THE FORMATION OF THE FISH PRODUCTS MARKET IN UKRAINE AND IN THE CENTRAL AND EASTERN EUROPEAN COUNTRIES

The long run trade orientation of an economy is measured in this article by an index which measures the extent to which the real exchange rate is distorted away from its free trade level by the trade regime. The technique for estimating a cross country index of real exchange rate distortion uses the international comparison of prices prepared by Robert Summers and Alan Heston. Resource endowment constitutes the norm and real overvaluation or undervaluation relative to this norm reveals whether incentives are directed to the domestic or international market. The index is constructed based on data for GDP/capita average price level in US dollars 1976-85 and GDP growth rate/capita 1976-85. Other sections are devoted the comparison of the procedure for 117 countries between 1976-85 and an examination of the empirical relationship between outward orientation and economic growth and sensitivity analysis. The results indicate that Latin America generally was overvalued by 33% relative to Asia and Africa was overvalued by 86%. The real exchange rate distortion index supports the view that Asian countries are more outward oriented. Asian economies have lower price levels which reflect relatively modest protection and incentives oriented to external markets. Latin American countries with moderately high price level and African countries with very high price levels reflect strong protection and incentives directed to production for the domestic market. An alternative specification which eliminates the dummy variables for Africa yields similar results with slightly lower magnitude; i.e. overvaluation is 60% instead of 86% for Africa and Latin America is overvalued by 39% instead of 33% over Asia. A table is provided which indicates by country the distortion and variability of the real exchange rate the GDP growth the 1976 GDP/capita and the investment rate. Another finding was that there is a significant negative relationship between distortion of the real exchange rate and growth of GDP/capita after controlling for the effects of real exchange rate variability and investment level with both the original specification and the alternative. The growth rate/capita of Latin American and African countries would increase 1.5-2.1% with a shift to move outward oriented trade policies. This gain as well as devaluation of the real exchange reate trade liberalization and maintenance of a stable real exchange rate would contribute to positive growth rates. In the analysis of the poorest 24 countries the result was that only rate distortion and not variability and investment rate explained the growth rate. The gain for Ghana for example of adopting the trade policies and exchange rate of Bangladesh would be 5% to its growth.

Background: Capital formation and foreign aid provide funds for the investment in developing countries for infrastructure development and acceleration economic progress. Educated, skillful and healthy human capital plays a vital role for the long-run economic development. Therefore, this paper aims to investigate the effect of capital formation, foreign aid and human capital development on economic growth in Nepal. Methods: This study applies ordinary least square modeling based on causal research design for the examination of impact of gross fixed capital formation (GFCF), foreign aid such as foreign grants (GRANT), foreign debt (DEBT), World Bank debt (WBD) and human capital development (HCD) on economic growth. Gross domestic per capita (GDPPC) is considered as economic growth and GFCF, GRANT, foreign DEBT, WBD and secondary school enrolment as HCD are considered as explanatory variables. Results: This study reveals capital formation has dominant role in economic growth and Nepalese government needs to focus on sufficient capital formation for the acceleration of rapid economic development. This paper explores foreign aid that plays significant role in bridging deficit budget and accelerates economic development. Government needs to use foreign aid for infrastructure development and rapid economic growth. However, secondary school enrolment as HCD does not have imperative positive influence because secondary education has expanded only in numbers but lack of quality, knowledge, skills to meet job market needs, more migration for low skill works and policy weakness of human capital development are the reasons of unexpected effect on economic growth in Nepal. Conclusion: This study concludes capital formation and foreign aid have leading role for economic growth. Nepalese policy makers, government and bureaucrats need to emphasize to articulate and implement various policies for formulation of more capital and optimum utilization of foreign aid for the rapid acceleration of economic development. Policy maker should formulate human capital polity emphasizing in improving education quality, knowledge, skills to meet market needs via fostering innovation, integrating digital skills, retaining talent human resources to accelerate productivity for rapid economic growth. Novelty: The novelty of this paper is integrated approach to examine combined effect of capital formation, foreign aid and human capital development on economic growth. This study unifies drivers of economic development within a single framework via holistic approach for achieving inclusive and sustainable economic development.

This study aims to examine the impacts of AI investment on economic growth, while controlling for labor force participation and gross fixed capital formation in Germany. The analysis is based on data collected on the state of economic development in Germany from the first quarter of 2012 to the fourth quarter of 2022. The study used a nonlinear ARDL bounds approach for these investigations. The outcomes clearly reveal that positive shocks to labor force participation and investment in AI significantly enhance economic growth (GDP) in Germany, whereas a positive shock to gross fixed capital formation (GFCF) has no considerable effect on economic growth. Likewise, negative shocks to gross fixed capital formation and AI investment increase GDP growth. Negative shock to the labor force reduces GDP growth. Recommendations are made that Germany must maintain its measured approach while offering long-term commitment. More spectacular AI expenditure increases are not required; prioritize steadiness and integration. Establish long-time-horizon AI development partnerships between government, universities, and industry with stable funding streams on long-term horizons. The fragile link between traditional capital formation and growth means that Germany needs to redefine productive investment.

The paper seeks to analyse foreign direct investment and its impact on economic growth in the Central European macro-region, with an emphasis on the Czech Republic, Estonia, Lithuania, Latvia, Hungary and Poland. The methodology applied in the first part involved comparative analysis of the trends in foreign investment and gross domestic product, and in the other, a growth model based on the Endogenous Growth Model. The construction of the model seeks to assess the impact of selected economic factors, including foreign direct investment, on the economic growth of transitional economies. The model employs a group of indicators, the gross domestic product per capita, volume of foreign direct investment per capita and gross fixed capital per capita, labour force growth and share of tertiary education graduates in the labour force. The analysis implied a great deal of spatial differentiation in the inflow of foreign investment and in economic growth. The highest volume of foreign direct investment per labour force is reported in Latvia, Estonia and the Czech Republic. The countries in this group are followed by Hungary and Slovakia, with Hungary displaying a marked decline in economic growth and investment attractiveness during recent years, and with Slovakia exhibiting the contrary trends to such an extent that Slovak economy has overtaken that of Hungary. The third group of countries contains Lithuania, Poland and Slovenia with the lowest volumes of foreign direct investment, where Lithuania nevertheless succeeded in sustaining a higher rate of growth of the gross domestic product. Poland also reported economic growth during the crisis years. In the second part, a growth model is compiled, which revealed that statistically significant relations exist between economic growth, labour force and investment growth. Growth of foreign direct investment positively demonstrates itself in increasing the rate of growth of the gross domestic product. As regards fixed capital formation, a higher growth will have an even more marked impact on the growth of the gross domestic product than was the case for foreign direct investment. Research confirms that each country is characterised by a different development trajectory in the field of economic growth and inflow of foreign investment. Foreign direct investment had an exceptional role to play in economic transformation as it contributed to the economic growth of Central and Eastern European countries and became a vehicle of integration for the transitional economies in global production chains.DOI: http://dx.doi.org/10.5755/j01.ee.27.3.3914

Purpose- In this study, the long-term and the short-term relationships between economic growth and trade liberalization for 13 transition countries in Europe were examined. Methodology- The dataset includes 303 observations from 1995 to 2016 for the variables of gross domestic product (GDP), export (EXP), import (IMP), gross fixed capital formation (GFCF), foreign direct investment (FDI) and human capital (HC). PLS Test, Pesaran (2004) CD-Test, Pesaran (2007) Unit Root Test, Swamy S Homogeneity Test conducted before causality and cointegration analysis. Dumitrescu & Hurlin (2012) Granger Panel Causality Test for short-term causality, and Westerlund ECM Panel Cointegration and PDOLS Estimator for long-term relationships analyses were employed. Findings- The short-term outcomes revealed that there is a bidirectional causality between (a) EXP and GDP, (b) GFCF and GDP, (c) FDI and GDP, (d) HC and GDP, and a unidirectional causality (e) from IMP to GDP. The long-term results show that (i) a 1% raise in EXP boosts GDP by 0.39%, (ii) a 1% raise in IMP boosts GDP by 0.11% (iii) a 1% raise in GFCF boosts GDP by 0.37% (iv) a 1% raise in FDI reduces GDP by 1.35%, (v) a 1% raise in HC boosts GDP by 0.54% in the long-term. Conclusion- Both in the short-term and the long-term trade liberalization has a positive impact on economic growth in mutual way between EXP, IMP and GDP as it is argued by the feed-back hypothesis.

Research purpose. This research paper delves into the threshold effects of public debt on economic growth in Central and Eastern European countries, both before and after the COVID-19 pandemic. Its primary aim is to pinpoint critical thresholds of the public debt-to-GDP ratio that either stimulate or hinder economic growth in these regions. Design / Methodology / Approach. Data spanning from 2010 to 2022 are analysed using a variety of advanced econometric techniques including OLS, Fixed-Effects models, Random-Effects models, Hausman Taylor Estimation, GMM Dynamic Panel Data, and the Threshold model. Findings. The study reveals significant findings: before the COVID-19 pandemic, the optimal debt-to-GDP ratio threshold stood at 42.5%. However, considering the combined impact of the COVID-19 pandemic and the Ukraine crisis, this threshold adjusts to 33.69%. This indicates that Central and Eastern European countries can safely increase their debt levels up to these points without detriment to economic growth. Beyond these thresholds, however, further increases in public debt yield negative economic effects. These findings offer invaluable insights for policymakers in Central and Eastern European countries, equipping them with evidence-based guidance on managing public debt levels effectively. Originality / Value / Practical implications. This study offers original insights into public debt thresholds' effects on economic growth in Central and Eastern European developing countries before and after the COVID-19 pandemic. It highlights how debt thresholds shifted due to the pandemic and geopolitical events, providing practical guidance for policymakers. These findings support evidence-based debt management strategies to ensure economic stability and growth in the CEE region.

The aim of study is to research the influences of Foreign Direct Investment (FDI), Gross Fixed Capital Formation (GFCF), Trade Openness of the Economy (OPEN) on Vietnam economic growth. This study uses the annual data for the period 1986 to 2019, obtained from World Bank and Vietnam General Statistics Office. The study shows that FDI, GFCF and OPEN together influence to Vietnam economic growth in the period 1986 – 2019 at significant level of 5%; in which the FDI and GFCF determinants have influenced greatly. In the short–run, the results indicate that there are bidirectional causality relationships running between FDI and GDP, OPEN and GDP, OPEN and GFCF, and there are undirectional causality relationships running from GDP to GFCF, from GFCF to FDI, from FDI to OPEN. The study’s results confirm that FDI as more reliable and less violate source of capital and can extend the Vietnam economic growth. According to the study’s results, the authors suggest some recommendations to increase the Vietnam economic growth.

Indeed, investing in human capital and ensuring political stability are critical for unlocking Pakistan's economic development. They boost economic progress, attract investments, and create opportunities by leveraging the country's youth and innovation potential. Overall, these factors ensure sustainable development and resilience against global issues. Therefore, the current study investigates the impact of human capital, the polity index, and government expenditure on Pakistan's economic growth. To evaluate it empirically, the researcher utilized the time series data ranging from 1985 to 2023 on human capital, labor force participation, foreign direct investment (FDI), Polity index, Government expenditure, and economic growth. GDP growth is dependent while selecting the other mentioned variables as independent. After confirming that all the variables are first difference stationary, the Johansen co-integration approach has been applied to detect links between variables. Results reveal that all the variables like human capital, employed labor force, FDI, polity index, and public expenditure positively impact Pakistan's GDP growth. They said empirical investigation finds that human capital, labor force, polity index, FDI, and public expenditure can increase economic development in Pakistan. Overall, these factors collectively add to sustainable economic progress and resilience.